EXECUTION VERSION
REINSURANCE AGREEMENT
BETWEEN
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
(REFERRED TO AS THE CEDING COMPANY)
AND
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(REFERRED TO AS THE REINSURER)
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS 1
Section 1.1 Definitions 1
ARTICLE II. BASIS OF REINSURANCE AND BUSINESS REINSURED 20
Section 2.1 Reinsurance 20
Section 2.2 Separate Accounts 20
Section 2.3 Existing Reinsurance 21
Section 2.4 Non-Guaranteed Elements 23
Section 2.5 Reserves and Liabilities Reporting 24
Section 2.6 Insurance Contract Changes 24
Section 2.7 Follow the Fortunes 24
ARTICLE III. TRANSFER OF ASSETS; PAYMENTS; SETTLEMENTS;
ADMINISTRATION
AND ACCOUNTING 25
Section 3.1 Payments by the Ceding Company 25
Section 3.2 Payments by the Reinsurer 26
Section 3.3 Modified Coinsurance 27
Section 3.4 Net Settlement 27
Section 3.5 Delayed Payments 28
Section 3.6 Offset and Recoupment Rights 29
Section 3.7 Administration and Accounting 29
Section 3.8 Certain Reports 29
Section 3.9 Reserved 30
Section 3.10 Books and Records 30
Section 3.11 Lockbox Accounts 31
Section 3.12 Ownership of Recoverables 31
Section 3.13 Reinsurer's Security Interest 32
Section 3.14 Novation of Covered Insurance Policies 33
Section 3.15 Alternative and Additional Structures 34
ARTICLE IV. LICENSES; REINSURANCE CREDIT 35
Section 4.1 Licenses 35
Section 4.2 Security 35
Section 4.3 Investment of Trust Assets 37
Section 4.4 Deposit of Assets 38
Section 4.5 Adjustments and Withdrawals 38
Section 4.6 Withdrawals by the Ceding Company 39
Section 4.7 Reserve Credit 41
Section 4.8 Representations, Warranties, and Covenants of the 41
Reinsurer
Section 4.9 Triggering Event; Custodial Account 42
Section 4.10 Cure of Triggering Event or Recapture Triggering Event 43
Section 4.11 Withdrawal Event 44
Section 4.12 Actions Following Reinvestment Event 45
Section 4.13 Equitable Remedies 45
ARTICLE V. OVERSIGHTS; COOPERATION; REGULATORY MATTERS 45
Section 5.1 Oversights 45
Section 5.2 Cooperation 46
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Section 5.3 Regulatory Matters 46
ARTICLE VI. DAC TAX 46
Section 6.1 Election 46
Section 6.2 Definitions 46
Section 6.3 Exchange of Information 47
Section 6.4 Effectiveness 47
Section 6.5 United States Tax Status Representation 47
ARTICLE VII. INSOLVENCY 47
Section 7.1 Insolvency of the Ceding Company 47
ARTICLE VIII. CUT THROUGH AND NOVATIONS UPON RECAPTURE 48
Section 8.1 Direct Payments by the Reinsurer 48
Section 8.2 Satisfaction and Discharge 49
Section 8.3 Redomestication of the Ceding Company 49
Section 8.4 Reinsurer Existing
Reinsurance Agreements 49
ARTICLE IX. DURATION; RECAPTURE 51
Section 9.1 Duration 51
Section 9.2 Survival 51
Section 9.3 Termination and Recapture 52
Section 9.4 Payments on Termination or Recapture 53
Section 9.5 Assignment of Reinsurer Existing
Reinsurance Agreements
Following Recapture 54
Section 9.6 Equitable Remedies 54
ARTICLE X. INDEMNIFICATION; DISCLAIMER 54
Section 10.1 Reinsurer's Obligation to Indemnify 54
Section 10.2 Ceding Company's Obligation to Indemnify 54
Section 10.3 Notice of Claim; Defense 55
Section 10.4 No Duplication; Exclusive Remedy 56
Section 10.5 Mitigation and Limitation on Set-off 57
Section 10.6 Recovery by Indemnified Party 57
Section 10.7 Waiver of Duty of Utmost Good Faith 58
ARTICLE XI. MISCELLANEOUS 58
Section 11.1 Notices 58
Section 11.2 Entire Agreement 59
Section 11.3 Governing Law and Jurisdiction 59
Section 11.4 No Third Party Beneficiaries 60
Section 11.5 Expenses 60
Section 11.6 Counterparts 60
Section 11.7 Severability 61
Section 11.8 Waiver of Jury Trial; Punitive Damages 61
Section 11.9 Treatment of Confidential Information 61
Section 11.10 Assignment 62
Section 11.11 Waivers 62
Section 11.12 Interpretation 62
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REINSURANCE AGREEMENT
THIS
REINSURANCE AGREEMENT (the "Agreement"), is made and entered into on
January 2, 2013 and effective as of the Effective Time by and between Hartford
Life and Annuity Insurance Company, a Connecticut-domiciled life insurance
company (the "Ceding Company") and The Prudential Insurance Company of America,
a New Jersey-domiciled life insurance company (the "Reinsurer"). For purposes of
this Agreement, the Ceding Company and the Reinsurer shall each be deemed a
"Party."
WHEREAS, Hartford Life, Inc. has agreed to sell, and Prudential Financial, Inc.
has agreed to purchase, directly or through one or more Affiliates, the Business
and certain assets of Hartford Financial Services Group, Inc. and its Affiliates
pursuant to a Purchase and Sale Agreement, dated as of September 27, 2012 (the
"Purchase Agreement");
WHEREAS, as contemplated by the Purchase Agreement, the Ceding Company wishes to
cede and retrocede to the Reinsurer, and the Reinsurer wishes to reinsure, on a
one-hundred percent (100%) indemnity reinsurance basis net of Collectible
Reinsurance, on the terms and conditions set forth herein, the risks arising in
respect of the Covered Insurance Policies (as hereinafter defined); and
[REDACTED]
NOW, THEREFORE, in consideration of the mutual and several promises and
undertakings herein contained, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Ceding Company
and the Reinsurer agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 DEFINITIONS. Any capitalized term used but not defined herein shall
have the meaning set forth in the Purchase Agreement. The following terms have
the respective meanings set forth below throughout this Agreement:
"Accounting Period" means each calendar quarter during the term of this
Agreement or any fraction thereof ending on the Recapture Date, the Termination
Date or the date this Agreement is otherwise terminated in accordance with
Section 9.1, as applicable.
"Actual Aggregate New Insurance Policy Reinsured Face Amount" means an amount
equal to the actual aggregate face amount of the New Insurance Policies issued
pursuant to Section 3.1(a)(i) of each Administrative Services Agreement
(excluding, for the avoidance of doubt, Group Conversion Policies, and new
insurance policies issued or reinsured pursuant to contractual commitments or
exchanges, such as term conversions, additional coverage options, and other
conversion rights) ceded under New
Reinsurance Agreements as of the last day of
the New Business Period.
"Administrator" has the meaning set forth in the Administrative Services
Agreement.
[REDACTED]
"Agreement" has the meaning set forth in the preamble.
"Beneficiary" has the meaning set forth in Section 8.1.
"Ceding Company" has the meaning set forth in the preamble.
"Ceding Company Collateral" has the meaning set forth in Section 4.2(f).
"Ceding Company Extra-Contractual Obligations" means (i) all Extra-Contractual
Obligations to the extent arising out of, resulting from or related to any act,
error or omission before the Effective Time, whether or not intentional,
negligent, in bad faith or otherwise, by the Ceding Company or any of its
Affiliates, or any service providers or Distributors engaged or compensated by
the Ceding Company or any of its Affiliates or otherwise, (ii) all
Extra-Contractual Obligations to the extent arising out of, resulting from or
related to any act, error or omission on or after the Effective Time, whether or
not intentional, negligent, in bad faith or otherwise, by the Ceding Company or
any of its Affiliates, or any service providers or Distributors engaged or
compensated by the Ceding Company or any of its Affiliates to the extent
attributable to a direction or request of the Ceding Company or any of its
Affiliates
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(including without limitation, in the performance of its services under the
Transition Services Agreement or Administrative Services Agreement), unless such
direction or request of the Ceding Company or any of its Affiliates has been
approved by the Reinsurer in writing, in which case any resulting error or
omission shall not be a Ceding Company Extra-Contractual Obligation, and (iii)
any liability of the Ceding Company as set forth on Schedule 1.1(A). For the
avoidance of doubt, Ceding Company Extra-Contractual Obligations include
"Extra-Contractual Obligations" assumed by the Ceding Company as part of its
reinsured liabilities under the terms of any Underlying
Reinsurance Agreements
which such "Extra-Contractual Obligations" arise before or after the Effective
Time out of acts or omissions by the Ceding Company as the reinsurer thereunder
or any of its directors, officers, employees, Affiliates, agents or
representatives relating to the business reinsured under such Underlying
Reinsurance Agreements.
"Ceding Company Indemnified Parties" has the meaning set forth in Section 10.1.
"Claim Notice" has the meaning set forth in Section 10.3(a).
"Collateral" has the meaning set forth in Section 3.13(a).
"Collectible Reinsurance" means all Reinsurance Recoverables other than any
amounts a reinsurer has failed to pay when due under any Existing
Reinsurance
Agreement (after giving effect to any cure periods thereunder) where such
non-payment continues 90 days from the date such payment was due (after giving
effect to any applicable cure periods) or, if the reinsurer is contesting such
payment in good faith, the date a final and non-appealable judgment or arbitral
award is entered requiring the reinsurer to pay such Reinsurance Recoverables.
"Company Action Level RBC" means, at any date of determination, two hundred
percent (200%) of the authorized control level risk-based capital of the
Reinsurer (i) determined in accordance with the Applicable Law of the state of
domicile of such entity and (ii) calculated using the risk-based capital factors
and formula prescribed by the National Association of Insurance Commissioners
(or any successor organization) and inclusive of any adjustments to such factors
or formula resulting from prescribed or permitted practices granted by the
applicable state of domicile.
"Confidential Information" means all documents and information concerning one
Party, any of its Affiliates, any Distributor, any mutual fund organization that
has its mutual funds offered as funding vehicles for one or more Separate
Accounts, the Business or the Covered Insurance Policies, including any
information relating to any Person insured directly or indirectly under the
Covered Insurance Policies, furnished to the other Party or such other Party's
Affiliates or Representatives in connection with this Agreement or the
transactions contemplated hereunder, including, without limitation, RBC Ratios
of the Reinsurer reported hereunder, except that Confidential Information does
not include information which: (a) at the time of disclosure or thereafter is
generally available to and known by the public other than by way of a disclosure
by the receiving Party hereunder or by any Representative or Affiliate of such
Party hereto; (b) was in the possession of, or becomes available to, the
receiving Party or such Party's Representatives or Affiliates on a
non-confidential basis, directly or indirectly, from a source other than the
disclosing Party or its Representatives, provided, that such source is not and
was
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not known to the receiving Party or its Representatives or Affiliates to be
prohibited from transmitting the information by a contractual, legal, fiduciary,
or other obligation of confidentiality by the disclosing Party; or (c) was
independently developed without violating any obligations under this Agreement
and without the use of any other Confidential Information or any derivative
thereof.
"Covered Insurance Policies" means (i) any and all binders, endorsements,
riders, policies, certificates, and contracts of individual or group life
insurance, and supplementary contracts of individual or group life insurance
(including retained asset accounts and all other settlement options) issued,
renewed or assumed by the Ceding Company in the United States, the District of
Columbia, Puerto Rico or Guam and that correspond to the policy forms of the
Ceding Company identified by form number on Schedule 1.1(B) (with the group life
items identified under a separate heading on such schedule), (ii) any and all
binders, endorsements, riders, policies, certificates, and contracts of
individual life insurance, and supplementary contracts of individual life
insurance (including retained asset accounts and all other settlement options)
issued in the United States, the District of Columbia, Puerto Rico or Guam that
are reinsured by the Ceding Company from an Underlying Company pursuant to the
Underlying
Reinsurance Agreements identified in Schedule 1.1(C) and that
correspond to the policy forms of the Ceding Company (or the Underlying
Companies) identified by form number on Schedule 1.1(B), (iii) all other
binders, endorsements, riders, policies, certificates, and contracts of
individual or group life insurance, and supplementary contracts of individual or
group life insurance (including retained asset accounts and all other settlement
options) issued, renewed, reinsured or assumed by the Ceding Company in the
United States, the District of Columbia, Puerto Rico or Guam on policy forms
that are substantially similar to the policy forms of the Ceding Company
identified on Schedule 1.1(B), (iv) the endorsements and riders to policies of
individual or group life insurance covered by clauses (i) through (iii) above
that are identified on Schedule 1.1(B), in each of clauses (i) through (iv),
issued, renewed, reinsured or assumed by the Ceding Company on or prior to the
Closing Date (including those that have lapsed and terminated with unpaid
claims), provided, that in each of clauses (i) through (iv) such item is
reflected or otherwise taken into account in the Closing Statement of General
Account Net Settlement, and (v) the New Insurance Policies; provided further,
that Covered Insurance Policies shall not include any policies listed on
Schedule 1.1(D).
"Cure Acknowledgement" has the meaning set forth in Section 4.10.
"Cure Event" has the meaning set forth in Section 4.10.
"Cure Notice" has the meaning set forth in Section 4.10.
"Current Policy Loan Amount" means, with respect to the Ceding Company, the
aggregate principal and accrued interest thereon of all policy loans with
respect to the Covered Insurance Policies, determined in accordance with SAP and
appropriately includable on the Contract Loans line of the Asset page in the
Statutory Financial Statements of the Ceding Company (or any successors to such
page).
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"Custodial Account" means an account established in the name of the Reinsurer
with the Custodial Bank pursuant to Section 4.9, which shall be subject to the
terms of the Custodial Account Control Agreement.
"Custodial Account Eligible Assets" has the meaning set forth in Section 4.9(a).
"Custodial Account Control Agreement" means the Account Control Agreement dated
as of the date hereof by and among the Reinsurer, the Ceding Company and the
Custodial Bank, substantially in the form of Exhibit I hereof.
"Custodial Bank" means [REDACTED].
"Custodial Funds" has the meaning set forth in Section 4.9(b).
"Custodial Fund Transfer Date" means, with respect to an Accounting Period, the
latest of (i) the fifth Business Day following delivery of the report
contemplated by Section 4.5(a) for such Accounting Period, (ii) the fifth
Business Day following delivery of the report contemplated by Section 4.5(b) for
such Accounting Period and (iii) the fifth Business Day following delivery of
the Settlement Statement for such Accounting Period.
"Economic Reserves" means, as of any date of determination, the general account
economic reserves with respect to the Covered Insurance Policies as of such date
without netting any reserves ceded to reinsurers under the Existing Reinsurance
Agreements or the Reinsurer Existing Reinsurance Agreements, as determined by
the Reinsurer in accordance with the methodologies and assumptions set forth on
Schedule 1.1(E) consistently applied; provided that the term "Economic Reserves"
shall not include reserves with respect to any Covered Insurance Policies
reinsured on a coinsurance basis under any Underlying Reinsurance Agreement for
which the Ceding Company holds the Trust Withheld Assets.
"Effective Time" means 12:01 a.m. (
New York time) on January 1, 2013.
"Eligible Assets" has the meaning set forth in Section 4.3.
"Estimated Aggregate New Insurance Policy Reinsured Face Amount" means, as of
any date of determination, an amount equal to the good faith estimate of the
amount of the New Insurance Policies that will be issued pursuant to Section
3.1(a)(i) of each Administrative Services Agreement (excluding, for the
avoidance of doubt, Group Conversion Policies, and new insurance policies issued
or reinsured pursuant to contractual commitments or exchanges, such as term
conversions, additional coverage options, and other conversion rights) and ceded
under New Reinsurance Agreements as of the last day of the New Business Period.
"Existing Reinsurance Agreements" means (a) the reinsurance agreements listed on
Schedule 1.1(F) under which the Ceding Company has ceded or retroceded to
reinsurers (whether or not affiliated with the Ceding Company) risks arising in
respect of the Covered Insurance Policies and the Ceding Company's interest in
any trust or other agreement or instrument providing security for the Ceding
Company with respect to such reinsurers' reinsurance obligations under such
reinsurance agreement, and (b) any reinsurance agreement, trust or other
agreement or instrument providing security for such reinsurance obligations
entered
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into by the Ceding Company with the prior written consent of the Reinsurer to
replace any of such reinsurance agreements or security arrangements following
any termination or recapture thereof, as all such reinsurance agreements may be
in force and effect from time to time and at any time, in each case that are (i)
in force or are being treated as being in force as of the date hereof or (ii)
terminated but under which there remains any outstanding liability or obligation
from the reinsurer. Any Existing Reinsurance Agreement that is novated to the
Reinsurer shall cease to be an Existing Reinsurance Agreement upon the
effectiveness of such novation.
"Extra-Contractual Obligations" means all Liabilities to any Person arising out
of or relating to the Covered Insurance Policies (other than Liabilities arising
under the express terms and conditions of the Covered Insurance Policies),
including, without limitation, any Liability for fines, penalties, Taxes, fees,
forfeitures, compensatory, punitive, exemplary, special, treble, bad faith, tort
or any other form of extra-contractual damages, as well as all legal fees and
expenses relating thereto, which Liabilities arise out of, result from or relate
to, any act, error or omission, whether or not intentional, negligent, in bad
faith or otherwise, arising out of or relating to the Covered Insurance
Policies, including, without limitation, (i) the form, sale, marketing,
distribution, underwriting, production, issuance, cancellation or administration
of the Covered Insurance Policies, (ii) the investigation, defense, trial,
settlement or handling of claims, benefits, or payments under the Covered
Insurance Policies, or (iii) the failure to pay or the delay in payment or
errors in calculating or administering the payment of benefits, claims or any
other amounts due or alleged to be due under or in connection with the Covered
Insurance Policies.
"Fair Market Value" means (i) as to cash, the amount of it; and (ii) as to an
asset other than cash, the amount at which such asset could be bought or sold in
a current transaction between willing parties, that is, other than in a forced
or liquidation sale.
"General Account Liabilities" means all liabilities and obligations, net of
Collectible Reinsurance under any Existing Reinsurance Agreements (but subject
to Section 2.3(b)), arising under the express terms of the Covered Insurance
Policies whether incurred before, at or after the Effective Time (unless
specified otherwise below), including:
1. all liabilities and obligations for incurred but not reported claims, pending
claims and benefits (including death benefits, waiver of premium benefits,
accident and health benefits, endowments or matured endowments, paid-up
additions, lump sum payments, annuitization payments, deferred payments,
discontinuance disbursements, payments in respect of market value adjustments,
rights to purchase additional coverage and any other settlement options),
unearned premiums, claim expenses, interest on claims or unearned premiums,
interest on policy funds, withdrawals, surrenders, amounts payable for returns
or refunds of premiums, guaranteed minimum death benefits and loans made under
the terms of any Covered Insurance Policy and other contract benefits, in each
case arising under the express terms of the Covered Insurance Policies;
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2. all liabilities and obligations (including any punitive, exemplary or other
extra-contractual damages or obligations other than Ceding Company
Extra-Contractual Obligations) to the extent assumed or reinsured by the Ceding
Company under the terms of any of the Underlying Reinsurance Agreements;
3. Ceding Company's obligations to deliver or maintain collateral security
(whether in trust, through a letter of credit or otherwise) or provide statutory
financial statement credit to counterparties under the terms of any of the
Underlying Reinsurance Agreements;
4. all liabilities and obligations arising out of any changes to the terms and
conditions of the Covered Insurance Policies mandated by Applicable Law or
initiated by the holder of any Covered Insurance Policy pursuant to the terms of
such policy;
5. (i) Taxes due in respect of Premiums received or accrued after the Effective
Time by the Ceding Company (other than Taxes measured by or imposed on the
income of the Ceding Company) and (ii) assessments and similar charges to the
extent attributable to Premiums received or accrued after the Effective Time in
connection with participation by either the Ceding Company or the Reinsurer,
whether voluntary or involuntary, in any guaranty association established or
governed by any Governmental Body; provided, that the amount of any Taxes
described in clause (i) shall be determined without regard to any credits,
deductions or offsets to such Taxes otherwise available to the Ceding Company,
other than any such credits, deductions or offsets that either are attributable
to amounts described in clause (ii) or are reflected as an asset on the Closing
Date Transfer Balance Sheet (calculated as if the Ceding Company issued and
administered the Covered Insurance Policies through a separate legal entity that
conducted no other insurance business); and provided further that, if any such
credit, deduction or offset either attributable to amounts described in clause
(ii) or reflected as an asset on the Closing Date Transfer Balance Sheet is used
by the Ceding Company to offset or otherwise reduce Taxes due in respect of
premiums that are not described in clause (i), the amount of such credit,
deduction or offset shall be applied against, and reduce, reimbursements for
Taxes due in respect of Premiums that are otherwise payable by the Reinsurer
pursuant to this Agreement;
6. Compensation (including both fronted and trail commissions) and other
servicing and administration fees payable with respect to the Covered Insurance
Policies to or for the benefit of the Distributors who marketed or produced the
Covered Insurance Policies, arising at and after the Effective Time;
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7. Subject to Section 2.3(b), amounts payable to reinsurers under the Existing
Reinsurance Agreements arising at and after the Effective Time;
8. all expense allowances payable under the terms of the Underlying Reinsurance
Agreements and all experience refunds payable under the terms of the Underlying
Reinsurance Agreements to the extent reflected in the Closing Statement of
General Account Net Settlement or arising on and after the Effective Time;
9. dividends payable under the Covered Insurance Policies which are attributable
to the operations of the Business or to surplus accumulated with respect to the
Business;
10. all liabilities and obligations which relate to (x) Premiums received by the
Reinsurer (or an Affiliate) or the Ceding Company pending transfer to the
Separate Accounts, and (y) one or more Separate Accounts that are not payable
out of the assets of the Separate Accounts, including any loss to a fund or
product resulting from pricing errors, expense calculation errors or missing
fund activity to the extent not resulting from acts or omission by the Ceding
Company or any of its Affiliates;
11. all escheat or unclaimed property liabilities or obligations arising under
or relating to the Covered Insurance Policies including any claim payment as a
result of procedures implemented by the Ceding Company in connection with
unclaimed property liabilities, whether or not included within the General
Account Reserves; and
12. any other liability or obligation arising out of or relating to the Covered
Insurance Policies for which a reserve or accrual has been established and
reported in a specific line item on the Closing Statement of General Account Net
Settlement applicable to the Ceding Company (after any disputes with respect
thereto have been finally resolved in accordance with the Purchase Agreement);
provided, however, that General Account Liabilities shall not include any
Separate Account Liabilities or Ceding Company Extra-Contractual Obligations or
expenses allocated to the Ceding Company under the Administrative Services
Agreement.
"General Account Modified Coinsurance Adjustment" means, with respect to any
Accounting Period, an amount equal to the General Account Modified Coinsurance
Amount as of the close of such Accounting Period less the General Account
Modified Coinsurance Amount as of the close of the preceding Accounting Period.
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"General Account Modified Coinsurance Amount" means, with respect to any
Accounting Period, collectively (i) the aggregate amount held by Underlying
Companies as modified coinsurance reserves with respect to the general account
liabilities under the Covered Insurance Policies ceded to the Ceding Company on
a modified coinsurance basis under the Underlying Reinsurance Agreements, and
(ii) the aggregate amount of Trust Withheld Assets, in each case of clauses (i)
and (ii) as of the close of such Accounting Period.
"General Account Modified Coinsurance Assets" means the assets held by, or in
trust by the Ceding Company for the benefit of, the Underlying Companies under
the Underlying Reinsurance Agreements in support of the General Account Modified
Coinsurance Amount.
"General Account Modified Coinsurance Investment Income" means an amount equal
to the investment income earned on the General Account Modified Coinsurance
Assets plus the amortization of the Interest Maintenance Reserve on the Trust
Withheld Assets.
"General Account Reserves" means the aggregate amount of general account
reserves (as described in Exhibits 5 and 6 of the Statutory Financial Statements
of the Ceding Company or any successors to such exhibits), deposits (as
described in Exhibit 7 of the Statutory Financial Statements of the Ceding
Company or any successors to such exhibit) and liabilities (as described in
Exhibit 8 of the Statutory Financial Statements of the Ceding Company or any
successors to such exhibit) (in each case, without regard to the transactions
contemplated by this Agreement) with respect to the Covered Insurance Policies,
calculated in accordance with SAP; provided, the term "General Account Reserves"
does not include the Separate Account Reserves.
[REDACTED]
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[REDACTED]
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[REDACTED]
"HLAC" means Hartford Life and Accident Insurance Company.
"HLAC General Account Reserves" has the meaning given to the term "General
Account Reserves" in the HLAC Reinsurance Agreement.
[REDACTED]
"HLAC Reinsurance Agreement" means the Reinsurance Agreement, effective as of
the Effective Time, by and between HLAC and the Reinsurer, as the same may be
amended, modified or supplemented from time to time.
"HLAC Third Party Reinsurance" means collectively Existing Reinsurance
Agreements (as defined in the HLAC Reinsurance Agreement) and Reinsurer Existing
Reinsurance Agreements (as defined in the HLAC Reinsurance Agreement).
"HLIC" means Hartford Life Insurance Company.
"HLIC Covered Insurance Policies" has the meaning given to the term "Covered
Insurance Policies" in the HLIC Reinsurance Agreement.
"HLIC General Account Reserves" has the meaning given to the term "General
Account Reserves" in the HLIC Reinsurance Agreement.
[REDACTED]
"HLIC Reinsurance Agreement" means the Reinsurance Agreement, effective as of
the Effective Time, by and between HLIC and the Reinsurer, as the same may be
amended, modified or supplemented from time to time.
"HLIC Third Party Reinsurance" means collectively Existing Reinsurance
Agreements (as defined in the HLIC Reinsurance Agreement) and Reinsurer Existing
Reinsurance Agreements (as defined in the HLIC Reinsurance Agreement).
"Indemnified Party" has the meaning set forth in Section 10.3(a).
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"Indemnifying Party" has the meaning set forth in Section 10.3(a).
"Interest Maintenance Reserve" means the liability reserve determined in
accordance with SAP, the purpose of which is to amortize realized capital gains
and losses resulting from fluctuations in interest rates.
"Lockbox Account" has the meaning set forth in Section 3.11.
"Lockbox Banks" has the meaning set forth in Section 3.11.
"Lockbox Control Agreement" has the meaning set forth in Section 3.11.
[REDACTED]
"NAIC" means the National Association of Insurance Commissioners or any
successor organization.
[REDACTED]
"Net Settlement" has the meaning set forth in Section 3.4(a).
"New Business Period" means the period from the date hereof to (a) the 18-month
anniversary of the date hereof or (b) the 24-month anniversary of the date
hereof, if the period referred to in clause (i) of Section 3.01(a) of the
Administrative Services Agreement is renewed for an additional 6 months pursuant
to the terms of the Administrative Services Agreement.
"New Insurance Policies" means the individual life insurance policies (including
binders, endorsement, riders and supplementary contracts of individual life
insurance) issued, renewed, reinsured or assumed by the Ceding Company following
the Closing Date in accordance with the Administrative Services Agreement or the
Wholesaling Agreement. New Insurance Policies shall exclude any Group Conversion
Policies that are not reinsured under the Group Conversion Retrocession
Agreement.
"New Insurance Policy Percentage Reinsured" means (i) with respect to any date
of determination prior to the last day of the New Business Period, the amount
expressed as a percentage equal to (x) the Estimated Aggregate New Insurance
Policy Reinsured Face Amount, divided by (y) the Aggregate Unreinsured Face
Amount as of the Effective Time, and (ii) with respect to any date of
determination on or following the last day of the New Business Period, the
amount, expressed as a percentage, equal to (x) the Actual Aggregate New
Insurance Policy Reinsured Face Amount, divided by (y) the Aggregate Unreinsured
Face Amount as of the Effective Time.
"New Reinsurance Agreements" means, collectively, (i) any new reinsurance
agreement entered into by the Reinsurer referred to in clause (c) of the
definition of "Reinsurer Existing Reinsurance Agreements", (ii) any new
reinsurance agreement entered into by the Reinsurer referred to in clause (c) of
the definition of "Reinsurer Existing Reinsurance Agreements" in the
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HLAC Reinsurance Agreement and (iii) any new reinsurance agreement entered into
by the Reinsurer referred to in clause (c) of the definition of "Reinsurer
Existing Reinsurance Agreements" in the HLIC Reinsurance Agreement.
"New Reinsurance Capacity" means, as of any date of determination, the product
of (i) the excess (if any) of (x) [REDACTED] minus (y) the sum of the Percentage
Reinsured for each fiscal year during the term of this Agreement or fraction
thereof ending on or prior to such date minus (z) the New Insurance Policy
Percentage Reinsured and (ii) the Aggregate Unreinsured Face Amount as of such
date.
"Non-Guaranteed Elements" means cost of insurance charges, credited interest
rates, mortality and expense charges, administrative expense risk charges,
policyholder dividends, policy loads and any other policy features that are
subject to change, and those items set forth in Actuarial Standard of Practice
1-Non-Guaranteed Charges or Benefits for Life Insurance Policies and Annuity
Contracts in effect as of the Effective Time and any successor rules for such
Non-Guaranteed Elements as in effect from time to time.
[REDACTED]
"Party" has the meaning set forth in the preamble.
[REDACTED]
13
[REDACTED]
"Payee" has the meaning set forth in Section 8.1.
"Percentage Reinsured" means, with respect to any fiscal year during the term of
this Agreement or fraction thereof, the amount, expressed as a percentage, equal
to (i) the aggregate face amount reinsured under each New Reinsurance Agreement
entered into during such fiscal year or fraction thereof as of the effective
date of such New Reinsurance Agreement, divided by (ii) the Aggregate
Unreinsured Face Amount, which for the avoidance of doubt based on the
definition of the "Aggregate Unreinsured Face Amount" will be determined as of
the last day of the fiscal year ending immediately prior to such fiscal year in
question or fraction thereof, or, with respect to the first fiscal year during
the term of this Agreement, the Effective Time.
[REDACTED]
"Policy Loan Recoverables" means all policy loan repayments, policy loan
interest and policy loan fees paid or payable in respect of the Covered
Insurance Policies.
"Premiums" means premiums, considerations, deposits, loan repayments and similar
amounts paid or payable in respect of the Covered Insurance Policies.
"Purchase Agreement" has the meaning set forth in the recitals.
"Qualified Existing Reinsurance Dispute" has the meaning set forth in Section
2.3(b).
14
"RBC Ratio" means the percentage equal to (i) the quotient of the Total Adjusted
Capital of the Reinsurer DIVIDED BY the Company Action Level RBC, MULTIPLIED BY
(ii) 100.
"RBC Reporting Deadline" means, as of any date, the date that is either: (i) 75
calendar days after the end of each calendar year, or (ii) 60 calendar days
after the end of any calendar quarter other than the calendar quarter ending on
December 31.
"Recapture Date" has the meaning set forth in Section 9.3(a).
"Recapture Triggering Event" means any of the following occurrences:
[REDACTED]
"Recoverables" has the meaning set forth in Section 3.1(b).
"Reinsurance IMR" means the Interest Maintenance Reserve associated with the
reinsurance by the Ceding Company on a modified coinsurance basis of the General
Account
15
Liabilities of certain of the Covered Insurance Policies, determined in
accordance with SAP applicable to the Underlying Companies that issued such
Covered Insurance Policies.
"Reinsurance IMR Investment Income" shall be equal to the investment income
earned on the assets supporting the Reinsurance IMR.
"Reinsurance Recoverables" means all amounts due or payable to the Ceding
Company under the Existing Reinsurance Agreements, including all recoverables,
returns, amounts in respect of profit sharing and all other sums to which the
Ceding Company may be entitled under the Existing Reinsurance Agreements.
[REDACTED]
"Reinsured Liabilities" means the General Account Liabilities, the Separate
Account Liabilities and any Reinsurer Extra-Contractual Obligations.
"Reinsurer" has the meaning set forth in the preamble.
[REDACTED]
"Reinsurer Extra-Contractual Obligations" means all Extra-Contractual
Obligations arising out of, resulting from or relating to any act, error or
omission on and after the Effective Time, whether or not intentional, negligent,
in bad faith or otherwise, by the Reinsurer or any of its Affiliates, or any
service providers or Distributors engaged or compensated by the Reinsurer or its
Affiliates or otherwise other than any Ceding Company Extra-Contractual
Obligations.
"Reinsurer Indemnified Parties" has the meaning set forth in Section 10.2.
16
"Reinvestment Event" means the following occurrence at any time following a
Trust Withdrawal Event:
[REDACTED]
"Related Trust" means reserve trust accounts established by the Reinsuer
[REDACTED] in connection with the transactions contemplated by the Purchase
Agreement and related agreements.
"Required Balance" means an amount equal to [REDACTED] of the Net Reserves.
"Reserve Credit" means full Statutory Financial Statement credit for the
reinsurance ceded to the Reinsurer under this Agreement or under any other
Reinsurance Agreement in the relevant company's NAIC Annual Statement Blank and
in all Statutory Financial Statements required to be filed with any Governmental
Body charged with supervision of insurance companies in all United States
jurisdictions in which such company is licensed, authorized or accredited to
transact business.
"Reserve Credit Event" means any event that would cause the Ceding Company to
not be permitted to receive Reserve Credit on any of its Statutory Financial
Statements and that such event has not been remedied prior to the last calendar
day of the calendar quarter in which such event occurs.
"SAP" means, with respect to any insurance company, the statutory accounting
principles prescribed or permitted by the insurance regulatory authorities of
the state of domicile of such insurance company or other applicable
jurisdictions.
"Separate Account Liabilities" means all liabilities, obligations, expenses and
Taxes (for the avoidance of doubt, other than Taxes measured by or imposed on
the income of the Ceding Company) arising out of or relating to the Covered
Insurance Policies, whether incurred before, at or after the Effective Time, to
the extent payable out of the Separate Accounts.
"Separate Account Reserves" means the aggregate amount of reserves and deposits
of the Ceding Company or any applicable Underlying Company attributable to the
Separate Account Liabilities (as would be described in Exhibits 3, 4 and 6 of
the Statutory Financial Statements related to separate accounts of the Ceding
Company or any such Underlying Ceding Company or any successors to such
exhibits), calculated in accordance with SAP.
"Separate Accounts" means the registered and unregistered separate accounts of
the Ceding Company and the Underlying Companies applicable to the Covered
Insurance Policies as identified in Schedule 1.1(H) hereto.
"Settlement Statement" has the meaning set forth in Section 3.4(a).
17
"Statutory Book Value" means with respect to any Eligible Asset, the dollar
amount thereof stated on the Statutory Financial Statements as admitted assets
of the Reinsurer, as determined in accordance with the statutory accounting
requirements in the Reinsurer's state of domicile, but disregarding any
permitted practices applicable to the Reinsurer.
"Statutory Financial Statements" means, with respect to any Person, the annual
and quarterly statutory financial statements of such Person filed with the
Governmental Body charged with supervision of insurance companies in the
jurisdiction of domicile of such Person to the extent such Person is required by
Applicable Law to prepare and file such financial statements.
"Terminal Accounting Period" means the Accounting Period during which the
Recapture Date or the Termination Date, as applicable, occurs.
"Terminal Settlement" has the meaning set forth in Section 9.4.
"Terminal Settlement Statement" has the meaning set forth in Section 9.4.
"Termination Date" has the meaning set forth in Section 9.3(b).
"Termination Event" means any failure by the Ceding Company (or any successor by
operation of law of the Ceding Company, including, but not limited to, any
receiver, liquidator, rehabilitator, conservator or similar Person of the Ceding
Company) to pay any material amount due to the Reinsurer under this Agreement
payable by the Ceding Company (including any Recoverables received by the Ceding
Company and payable to the Reinsurer) and such failure has not been cured within
90 calendar days after written notice thereof from the Reinsurer.
"Third-Party Claim" has the meaning set forth in Section 10.3(a).
"Total Adjusted Capital" means, with respect to any insurance company, its total
adjusted capital as calculated in accordance with the most current formula for
calculating such amount adopted by the insurance regulatory authority in such
insurance company's state of domicile.
"Transaction Agreements" means the Purchase Agreement and each of the Ancillary
Agreements other than this Agreement.
"Treasury Regulations" means the Treasury Regulations (including temporary and
proposed Treasury Regulations) promulgated by the United States Department of
Treasury with respect to the Code or other United States federal Tax statutes.
"Triggering Event" shall occur if [REDACTED]
18
[REDACTED]
"Trust Account" means the trust account established by the Reinsurer for the
benefit of the Ceding Company under the Trust Agreement.
[REDACTED]
"Trust Withdrawal Event" has the meaning set forth in Section 4.11(a).
"Trust Withdrawal Event Conditions" means [REDACTED]
"Trust Withdrawal Event Acknowledgement" has the meaning set forth in Section
4.11(a).
"Trust Withdrawal Event Notice" has the meaning set forth in Section 4.11(a).
"Trust Withheld Assets" means those assets required to be held by the Ceding
Company in trust for the benefit of any Underlying Company (and not transferred
to the Reinsurer) with respect to any Covered Insurance Policies reinsured on a
coinsurance basis under any Underlying Reinsurance Agreement.
"Trustee" has the meaning set forth in Section 4.2(a).
"UCC" means the Uniform Commercial Code as in effect from time to time in the
Ceding Company's state of domicile.
"Unamortized Portion of the Ceding Commission" means, [REDACTED] If the Parties
cannot agree on the amount of the Unamortized Portion of the Ceding Commission
as of the Termination Date or Recapture Date, as applicable, the issue will be
referred to, and conclusively determined by [REDACTED]
19
[REDACTED] whose fees will be shared equally by the Parties.
"Underlying Companies" means the insurance companies that have ceded any
liabilities or obligations under Covered Insurance Policies to the Ceding
Company pursuant to any Underlying Reinsurance Agreement.
"Underlying Reinsurance Agreements" means the reinsurance agreements listed in
Schedule 1.1(C) under which the Underlying Companies have ceded any liabilities
or obligations under Covered Insurance Policies to the Ceding Company.
ARTICLE II.
BASIS OF REINSURANCE AND BUSINESS REINSURED
SECTION 2.1 REINSURANCE.
(a) Subject to the terms and conditions of this Agreement, as of the Effective
Time, the Ceding Company hereby cedes on an indemnity reinsurance basis to the
Reinsurer, and the Reinsurer hereby accepts and agrees to assume and indemnity
reinsure, one hundred percent (100%) of all General Account Liabilities on a
combined coinsurance basis and modified coinsurance basis (net of Collectible
Reinsurance) and one hundred percent (100%) of all Separate Account Liabilities
on a modified coinsurance basis. In addition, on and after the Effective Time,
the Reinsurer hereby assumes all Reinsurer Extra-Contractual Obligations. This
Agreement is solely between the Ceding Company and the Reinsurer and shall not
create any legal relationship whatsoever between the Reinsurer and any Person
other than the Ceding Company. The reinsurance effected under this Agreement
shall be maintained in force, without reduction, unless such reinsurance is
recaptured, terminated or reduced as provided herein. On and after the Effective
Time, the Reinsurer shall be obligated to make payments to or on behalf of the
Ceding Company, as and when due, of all Reinsured Liabilities in accordance with
Article III.
(b) Upon the reinstatement or reissuance of any lapsed or surrendered Covered
Insurance Policy in accordance with the terms thereof, such Covered Insurance
Policy shall be automatically reinsured hereunder.
SECTION 2.2 SEPARATE ACCOUNTS.
(a) For each of the Covered Insurance Policies, the amount to be invested on a
variable basis in accordance with the terms of such Covered Insurance Policy
shall be held by the Ceding Company or the Underlying Companies, as applicable,
in the Separate Accounts, and all Premiums with respect to such Covered
Insurance Policy shall be deposited in the Separate Accounts to the extent
required to be deposited therein by such Covered Insurance Policy.
20
From and after the Effective Time, the Ceding Company shall retain, control and
own all assets contained in the Ceding Company's Separate Accounts and shall
hold its Separate Account Reserves with respect to the Covered Insurance
Policies that are funded, in whole or in part, by one or more of the Ceding
Company's Separate Accounts and such Separate Account Reserves shall be reported
by the Ceding Company on its Separate Account balance sheets, consistent with
SAP. The Reinsurer acknowledges that the Underlying Companies will retain,
control and own all assets contained in such Underlying Companies' Separate
Accounts and shall hold such Underlying Companies' Separate Account Reserves
with respect to the Covered Insurance Policies that are funded, in whole or in
part, by one or more such Underlying Companies' Separate Accounts.
(b) For each of the Covered Insurance Policies, the amount to be paid with
respect to surrenders, loans, annuitization payments, death benefits,
Compensation or any other amounts with respect to such Covered Insurance Policy
shall be paid out of the Separate Accounts to the extent required by such
Covered Insurance Policy. For purposes hereof, the Reinsured Liabilities
attributable to the Covered Insurance Policies shall be apportioned between the
General Account Liabilities and the Separate Account Liabilities in a manner
consistent with the applicable Covered Insurance Policies and Applicable Law.
[REDACTED]
21
[REDACTED]
SECTION 2.4 NON-GUARANTEED ELEMENTS. The Ceding Company shall set all Non-
Guaranteed Elements under the Covered Insurance Policies from and after the
Effective Time, taking into account the recommendations of the Reinsurer acting
in its capacity as Administrator under the Administrative Services Agreement
with respect thereto, which the Ceding Company shall only reject in good faith
and on a reasonable basis that such recommendations fail to comport with
Applicable Law, applicable Actuarial Standards of Practice or the terms of any
Covered Insurance Policy. The Ceding Company shall, to the extent it has rights
to do so, convey to the Underlying Companies under the Underlying Reinsurance
Agreements the recommendations of the Reinsurer with respect to Non-Guaranteed
Elements as if such recommendations were the Ceding Company's own. The Ceding
Company will indemnify the Reinsurer for Losses arising out of any failure of
the Ceding Company to implement or otherwise put into effect the Reinsurer's
recommendations with respect to Non-Guaranteed
23
Elements in accordance with this Section, other than to the extent that
following such recommendation would have violated any Applicable Law, applicable
Actuarial Standards of Practice or the terms of any Covered Insurance Policy.
SECTION 2.5 RESERVES AND LIABILITIES REPORTING. Pursuant to the Administrative
Services Agreement and in accordance with the terms thereof, the Reinsurer
shall, in its capacity as Administrator, provide to the Ceding Company
information relating to the reserves and liabilities in respect of the Covered
Insurance Policies.
SECTION 2.6 INSURANCE CONTRACT CHANGES. Except as directed by the Reinsurer or
as performed by the Reinsurer (or its duly appointed assignee or delegatee)
acting on behalf of the Ceding Company in its capacity as Administrator, the
Ceding Company, on its own initiative, shall not change the terms or conditions
of any Covered Insurance Policy, other than for any change required by the terms
of any Covered Insurance Policies, any Governmental Body or Applicable Law. If
the Reinsured Liabilities under any of the Covered Insurance Policies are
changed (a) because of changes made on or after the Effective Time in the terms
and conditions of the Covered Insurance Policies effected by the Reinsurer,
including in its capacity as Administrator, or (b) pursuant to the terms of any
Covered Insurance Policies or by reason of the requirements of any Governmental
Body or Applicable Law, the Reinsurer will participate, on the reinsurance basis
set forth in Section 2.1, and assume one hundred percent (100%) of all
liabilities and obligations resulting from such changes and shall fully
indemnify the Ceding Company and hold the Ceding Company harmless with respect
to such changes, in each case, subject to the terms and conditions of this
Agreement. With respect to any change that, despite being required by the terms
of any Covered Insurance Policies, any Governmental Body or Applicable Law, the
Reinsurer is not implementing, the Ceding Company shall, to the extent
practicable, prior to the effectiveness of any such change, promptly notify the
Reinsurer of such proposed change and afford the Reinsurer, at the Reinsurer's
expense, the opportunity, to the extent practicable, to object to such change
under applicable administrative procedures (both formal and informal). In the
event the Reinsurer seeks to object as provided in the previous sentence, the
Reinsurer shall indemnify and hold the Ceding Company harmless for any Loss so
suffered by the Ceding Company in accordance with Article X.
SECTION 2.7 FOLLOW THE FORTUNES. The Reinsurer's liability under this Agreement
shall attach simultaneously with that of the Ceding Company under the Covered
Insurance Policies, and the Reinsurer's liability under this Agreement shall be
subject in all respects to the same risks, terms, rates, conditions,
interpretations, assessments, waivers, proportion of Premiums paid to the Ceding
Company without any deductions, and to the same modifications, alterations,
terminations and recaptures, as the respective Covered Insurance Policies and
Reinsured Liabilities to which liability under this Agreement attaches, the true
intent of this Agreement being that the Reinsurer shall, subject to the terms,
conditions, and limits of this Agreement, follow the fortunes of the Ceding
Company under the Covered Insurance Policies, and the Reinsurer shall be bound,
without limitation, by all payments and settlements under the Covered Insurance
Policies.
24
ARTICLE III.
TRANSFER OF ASSETS; PAYMENTS; SETTLEMENTS; ADMINISTRATION AND ACCOUNTING
SECTION 3.1 PAYMENTS BY THE CEDING COMPANY.
(a) As consideration for the Reinsurer's agreement to provide reinsurance
pursuant to this Agreement, the Ceding Company hereby sells, assigns, transfers
and delivers to the Reinsurer, effective as of the Effective Time, in accordance
with the Purchase Agreement, to the Reinsurer, (i) Investment Assets selected in
accordance with the Purchase Agreement with a Statutory Book Value (as such term
is defined in the Purchase Agreement) equal to (A) the Initial Reinsurance
Premium, MINUS (B) the value of Policy Loans assigned to the Reinsurer
hereunder, MINUS (C) the Accrued Investment Income transferred to the Reinsurer
hereunder and MINUS (D) the Tax Gross-Up Change in IMR, in each case determined
by reference to the Estimated Statement of General Account Net Settlement for
the Ceding Company with respect to the Covered Insurance Policies hereunder
pursuant to the Purchase Agreement, (ii) the Policy Loans identified on line B.2
of the Statement of General Account Net Settlement, (iii) the Accrued Investment
Income identified on line B.1 of the Statement of General Account Net Settlement
and (iv) cash in an amount equal to the Tax Gross-Up Change in IMR. Such
transfer shall be adjusted following the date hereof in accordance with the
procedures set forth therefor in the Purchase Agreement.
(b) As additional consideration for the reinsurance provided herein, subject to
Section 2.3(b), the Ceding Company hereby sells, assigns, transfers and delivers
to the Reinsurer, effective as of the Effective Time, all of the Ceding
Company's (or any of its Affiliates') right, title and interest in the following
with respect to the Covered Insurance Policies or the Existing Reinsurance
Agreements receivable by the Ceding Company and attributable to periods on and
after the Effective Time (items (i) through (iv), collectively, the
"Recoverables"):
(i) Premiums;
(ii) Reinsurance Recoverables, but not including any amounts to the
extent attributable to any Excluded Liabilities retained by the
Ceding Company including the Ceding Company Extra-Contractual
Obligations;
(iii) Without duplication, all charges and fees, including, management
fees, marketing and distribution fees, cost of insurance charges,
premium loads, record-keeping fees, policy loan fees, mortality and
expense risk charges, administrative expense charges, rider
charges, contract maintenance charges, back-end sales loads and
other considerations billed separately, and amounts for the pre-Tax
amount of any expense reimbursement (other than "soft dollars"),
indemnification, revenue-sharing or other payments paid or payable
to the Ceding Company or any of its Affiliates by any mutual fund
organization attributable to the use of such
25
organization's mutual funds as funding vehicles to the extent
attributable to the Covered Insurance Policies, but not including
any amounts to the extent attributable to any Excluded Liabilities
retained by the Ceding Company including the Ceding Company
Extra-Contractual Obligations; and
(iv) Without duplication, all other payments, collections, releases of
funds paid or payable to the Ceding Company or any of its Affiliates
and recoveries relating to the Reinsured Liabilities or the Covered
Insurance Policies (including releases of funds (including releases
of investment income to the Ceding Company) out of the Separate
Accounts) but not including any amounts recovered to the extent
attributable to any Excluded Liabilities retained by the Ceding
Company including the Ceding Company Extra-Contractual Obligations.
To the extent the foregoing sentences are ineffective to transfer ownership of
the type of asset described, the Ceding Company agrees to execute and record or
cause its Affiliates to execute and record all additional instruments, bills of
sale, deeds and other documents necessary to transfer such asset as soon
practicable after the Effective Time. Direct receipt by the Reinsurer or any of
its Affiliates of any such amounts shall satisfy any obligation of the Ceding
Company to transfer any such amount to the Reinsurer hereunder. Any Recoverables
paid to, or received by, any Affiliate of the Ceding Company shall be deemed to
have been received by the Ceding Company and shall be payable hereunder as if
received directly by the Ceding Company.
(c) The Ceding Company hereby appoints the Reinsurer as its agent to collect all
Recoverables in the Ceding Company's name for the account of the Reinsurer. The
Ceding Company agrees and acknowledges that the Reinsurer and its permitted
assigns and delegatees are entitled to enforce, in the name of the Ceding
Company, all rights at law or in equity or good faith claims of the Ceding
Company with respect to such Recoverables. If necessary for such collection, the
Ceding Company shall reasonably cooperate, at the Reinsurer's expense, in any
litigation or other dispute resolution mechanism relating to such collection.
The Parties acknowledge and agree that the Ceding Company shall have no
obligation to seek collection of any Recoverables and that the Reinsurer shall
be responsible for and has hereby assumed the financial risk of any uncollected
or uncollectible Recoverables from any payors thereof (other than the Ceding
Company or any of its Affiliates). To the extent that the Ceding Company
recovers any Recoverables from any third party attributable to the Covered
Insurance Policies, the Ceding Company shall, in accordance with Section 3.4,
transfer such amounts to the Reinsurer, together with any pertinent information
that the Ceding Company may have relating thereto.
SECTION 3.2 PAYMENTS BY THE REINSURER. In consideration of the reinsurance by
the Ceding Company of the Covered Insurance Policies, the Reinsurer shall pay to
the Ceding Company, on the Closing Date, its share of the Ceding Commission
attributable to the reinsurance hereunder in the manner contemplated in Section
3.3(b) of the Purchase Agreement. In addition, the Reinsurer shall pay and
discharge all payments made under or as a result of the Reinsured Liabilities
which are or which become due and payable at or at any time after the Effective
Time.
26
SECTION 3.3 MODIFIED COINSURANCE.
(a) The Reinsurer agrees that the Ceding Company shall retain, maintain, and
own, and shall permit the Underlying Companies under the Covered Insurance
Policies to retain, maintain, and own, their respective General Account Modified
Coinsurance Assets collectively equal to the General Account Modified
Coinsurance Amount.
(b) Simultaneously with the payment of the Initial Reinsurance Premium pursuant
to Section 3.1(a), the Ceding Company shall withhold from the Reinsurer an
amount equal to the General Account Modified Coinsurance Amount, if any, as at
the Effective Time as an initial General Account Modified Coinsurance
Adjustment.
SECTION 3.4 NET SETTLEMENT.
(a) During the term of this Agreement, a settlement amount between the Ceding
Company and the Reinsurer as of the last day of each Accounting Period or other
shorter period as agreed upon by the Parties (the "Net Settlement") shall be
calculated by the Reinsurer in accordance with clause (b) below, and a statement
setting forth details of such calculation (the "Settlement Statement")
containing the information set forth in Exhibit B hereto shall be delivered by
the Reinsurer to the Ceding Company in accordance with the Administrative
Services Agreement. If the amount of the Net Settlement for an Accounting Period
is positive, the Ceding Company shall pay such amount to the Reinsurer within 5
Business Days of its receipt of the Settlement Statement for such Accounting
Period. If the amount of the Net Settlement for an Accounting Period is
negative, the Reinsurer shall pay the absolute value of such amount to the
Ceding Company within 5 Business Days from the date it delivers the Settlement
Statement for such Accounting Period to the Ceding Company.
(b) The Net Settlement with respect to any Accounting Period for the reinsurance
covered hereunder is equal to the following:
(i) the Recoverables actually received by the Ceding Company or the
Reinsurer with respect to the Covered Insurance Policies during such
Accounting Period (without duplication for amounts under clauses
(iv), (v) and (vi) below); MINUS
(ii) the General Account Liabilities payable by the Reinsurer on a cash
basis in respect of the Covered Insurance Policies during such
Accounting Period; MINUS
(iii) the Separate Account Liabilities payable out of the Separate
Accounts in respect of the Covered Insurance Policies during such
Accounting Period; MINUS
27
(iv) the Reinsurance IMR as of the close of such Accounting Period less
the Reinsurance IMR as of the close of the preceding Accounting
Period; PLUS
(v) the General Account Modified Coinsurance Investment Income and the
Reinsurance IMR Investment Income, in each case, received with
respect to such Accounting Period; MINUS
(vi) the General Account Modified Coinsurance Adjustment with respect to
such Accounting Period.
(c) To the extent that the Reinsurer makes any direct payments from its own
funds or out of any Separate Account to or on behalf of the Ceding Company in
respect of Reinsured Liabilities in respect of an Accounting Period, whether in
its capacity as Administrator or otherwise, the amount of any such payments
shall be deducted from the amount payable included in clause (ii) or clause
(iii), as applicable, of Section 3.4(b) for such Accounting Period. In addition,
to the extent Recoverables are actually received by, and are available to, the
Reinsurer (or one of its Affiliates) in respect of an Accounting Period, whether
in its capacity as Administrator or otherwise, the amount of any such
Recoverables received shall be deducted from the amount of Recoverables included
in clause (i) of Section 3.4(b) for such Accounting Period. To the extent that
the Reinsurer makes any payments under the Hold Harmless and Indemnification
Agreement, the amount of such payments shall be deducted from the amount payable
included in clause (ii) or clause (iii), as applicable, of Section 3.4(b) and
the Reinsurer shall be discharged of any obligation hereunder with respect
thereto to the extent of such payment.
(d) With respect to the General Account Modified Coinsurance Investment Income,
the Reinsurance IMR Investment Income, the Reinsurance IMR and the General
Account Modified Coinsurance Adjustment (in each case that are not with respect
to the Trust Withheld Assets) for an Accounting Period, to the extent that the
calculation of any of such items would result in an amount payable to the
Reinsurer, only such amounts as are actually received by the Ceding Company from
the Underlying Companies under the Covered Insurance Policies by way of payment
or offset or otherwise shall be included in such Net Settlement.
SECTION 3.5 DELAYED PAYMENTS. If there is a delayed settlement of any payment
due hereunder, interest will accrue on such payment at the then applicable prime
rate of interest, as reported by The Wall Street Journal (or, if The Wall Street
Journal has ceased or suspended regular publication, another nationally
distributed newspaper of general circulation reasonably selected by the Ceding
Company) until settlement is made. For purposes of this Section 3.5, a payment
will be considered overdue, and such interest will begin to accrue, on the 10th
day immediately following the date such payment is due. For greater clarity, (i)
a payment shall be deemed to be due hereunder on the last date on which such
payment may be timely made under the applicable provision, and (ii) interest
will not accrue on any payment due to a Party hereunder unless the delayed
settlement thereof was caused by the other Party.
28
SECTION 3.6 OFFSET AND RECOUPMENT RIGHTS. Any debits or credits incurred on or
after the Effective Time in favor of or against either the Ceding Company or the
Reinsurer with respect to this Agreement are deemed mutual debits or credits and
may be set off and recouped, and only the net balance shall be allowed or paid.
In the event of any liquidation, rehabilitation, conservation, supervision,
receivership or similar proceeding by or against the Ceding Company or the
Reinsurer, the rights of offset and recoupment set forth in this Section 3.6
shall apply to the fullest extent permitted by Applicable Law.
SECTION 3.7 ADMINISTRATION AND ACCOUNTING. Pursuant to the terms of the
Administrative Services Agreement but subject to the Transition Services
Agreement, the Reinsurer (or one of its Affiliates), in its capacity as
Administrator, will administer the Covered Insurance Policies and the related
administrative services agreements.
SECTION 3.8 CERTAIN REPORTS.
(a) At each RBC Reporting Deadline that pertains to a calendar year end, the
Reinsurer shall provide to the Ceding Company the RBC Ratio of the Reinsurer as
of the last day of such calendar year. At each RBC Reporting Deadline that
pertains to a calendar quarter other than the calendar quarter ending on
December 31, the Reinsurer shall provide to the Ceding Company: [REDACTED]
(b) During the term of this Agreement, regardless of whether the Reinsurer is
required by Applicable Law to calculate its RBC Ratio, it shall calculate its
RBC Ratio in accordance with the factors and formulae prescribed by the
applicable Governmental Body with respect to a standalone life insurance company
domiciled in the Reinsurer's jurisdiction of domicile as if the RBC Ratio
calculation were still in effect with respect to the Reinsurer. In the
29
event of an elimination by Applicable Law of the requirement for the Reinsurer
to calculate risk based capital or a material change in the factors and formulae
prescribed by the insurance regulatory authority in the Reinsurer's state of
domicile with respect to the components and methodologies contained in the
calculation of the RBC Ratio (including material changes to the calculation of
Total Adjusted Capital), the Parties shall amend this Agreement to incorporate
an alternative calculation that is reasonably equivalent to the components of
and methodologies contained in the calculation of the Reinsurer's RBC Ratio in
effect as of the Effective Time within 30 calendar days after the implementation
of such change, and if the Parties cannot agree on any such alternative, the
Reinsurer shall continue to calculate the RBC Ratio as if such material change
had not occurred.
(c) The Reinsurer shall provide written notice of the occurrence of any
Triggering Event or a Recapture Triggering Event (i) within 2 Business Days
after becoming aware of its occurrence or (ii) in connection with its reporting
of the RBC Ratio to the Governmental Body charged with supervision of insurance
companies in the Reinsurer's jurisdiction of domicile or its good faith estimate
of its RBC Ratio in connection with a confirmation under clause (a) above which
would result in a Triggering Event or a Recapture Triggering Event. In addition,
the Reinsurer shall cooperate fully with the Ceding Company and promptly respond
to the Ceding Company's reasonable inquiries from time to time concerning the
determination of whether a Triggering Event or a Recapture Triggering Event has
occurred.
(d) The Reinsurer shall provide the Ceding Company with its annual and quarterly
Statutory Financial Statements and a copy of its annual audited Statutory
Financial Statements along with the audit report thereon, in each case to the
extent not publicly available.
SECTION 3.9 RESERVED.
SECTION 3.10 BOOKS AND RECORDS. The Reinsurer shall, and shall cause its
Affiliates to, preserve, until such date as may be required by the Reinsurer's
standard document retention policies (or such other later date as may be
required by Applicable Law), all books and records related to the Business.
During such period, upon any reasonable request from the Ceding Company or its
Representatives, the Reinsurer shall (a) provide to the Ceding Company and its
Representatives reasonable access to such books and records during normal
business hours; provided that such access shall not unreasonably interfere with
the conduct of the business of the Reinsurer, and (b) permit the Ceding Company
and its Representatives to make copies of such records, in each case, at no cost
to the Ceding Company or its Representatives (other than for reasonable
out-of-pocket expenses). Such books and records may be sought under this Section
3.10 by the Ceding Company for any reasonable purpose, including to the extent
reasonably required in connection with accounting, litigation, federal
securities disclosure or other similar purpose. Notwithstanding the foregoing,
any and all such books and records may be destroyed by the Reinsurer if the
Reinsurer sends to the Ceding Company written notice of its intent to destroy
such records, specifying in reasonable detail the contents of the records to be
destroyed; such records may then be destroyed after the 60th day following such
notice unless the Ceding Company notifies the Reinsurer that it desires to
obtain possession of such records, in which event the Reinsurer shall transfer
the records to the Ceding Company and the Ceding Company
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shall pay all reasonable expenses of the Reinsurer in connection therewith.
Nothing herein shall require the Reinsurer to disclose any information to the
Ceding Company or its Representatives if such disclosure would jeopardize any
attorney-client privilege, the work product immunity or any other legal
privilege or similar doctrine or contravene any Applicable Law, Court Order or
Regulatory Agreement (including any confidentiality agreement with an
unaffiliated litigant or regulator to which the Reinsurer or any of its
Affiliates is a party) or require the Reinsurer to disclose its Tax records or
any personnel or related records.
SECTION 3.11 LOCKBOX ACCOUNTS. The Reinsurer shall establish one or more
lockboxes and accounts in the name of the Reinsurer to be used solely with
respect to the Recoverables (each lockbox and related account, a "Lockbox
Account"). The Lockbox Accounts shall be owned by the Reinsurer and all
Recoverables received directly by the Reinsurer or any of its Affiliates shall
be deposited in the Lockbox Accounts. The Reinsurer may, and at the request of
the Reinsurer the Ceding Company shall, give written notice to each Person
responsible for payment of any Recoverables after the Effective Time that such
Recoverables have been sold and assigned to the Reinsurer and that payment
thereof is to be made to the Reinsurer at the Lockbox Account designated by the
Reinsurer. The Parties acknowledge that the Lockbox Accounts shall be subject to
the terms of the Account Control Agreement (the "Lockbox Control Agreement")
being entered into concurrently herewith by the Ceding Company, the Reinsurer
and each bank with which a Lockbox Account is maintained (the "Lockbox Banks").
On and after the date hereof, if the Reinsurer establishes any additional
Lockbox Account, upon the establishment of such Lockbox Account, it shall be
subject to an account control agreement with the relevant lockbox bank
substantially similar to the Lockbox Control Agreement entered into by the
Ceding Company, the Reinsurer and each bank with which such Lockbox Account is
maintained.
(a) Prior to the occurrence of a Triggering Event or a Recapture Triggering
Event, the disposition of assets in the Lockbox Accounts shall be at the sole
direction and discretion of the Reinsurer. Subject to Section 3.11(b) below,
upon the occurrence, and during the continuance, of a Triggering Event or a
Recapture Triggering Event, Recoverables collected in the Lockbox Accounts shall
be transferred by the Reinsurer directly to the Custodial Account on a daily
basis.
(b) Upon the occurrence, and during the continuance, of a Recapture Triggering
Event and upon notice by the Ceding Company to the Reinsurer and the Lockbox
Banks, (x) the Reinsurer shall cease to be entitled to direct the disposition of
assets in the Lockbox Accounts and (y) the Ceding Company shall be entitled,
without the consent of the Reinsurer, to direct the Lockbox Banks to transfer
assets in the Lockbox Accounts to the Custodial Account. During any period in
which the Ceding Company is entitled to give the direction referred to in clause
(y) of the preceding sentence, the Ceding Company shall cause Recoverables
collected in the Lockbox Accounts to be transferred to the Custodial Account on
a daily basis.
SECTION 3.12 OWNERSHIP OF RECOVERABLES. The Parties intend that the Ceding
Company's assignment pursuant to Section 3.1(b) to be a present sale and
assignment of all of
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the Ceding Company's rights, title and interest in the Recoverables and not an
assignment for security. All monies, checks, drafts, money orders, postal notes
and other instruments that may be received after the Effective Time by the
Ceding Company for Recoverables shall be held in trust by the Ceding Company for
the benefit of the Reinsurer and shall be promptly transferred and delivered to
the Reinsurer, and any such instruments when so delivered shall bear all
endorsements required to effect the transfer of same to the Reinsurer. The
Reinsurer is hereby authorized to endorse for payment to the Reinsurer any such
checks, drafts, money orders and other instruments pertaining to the
Recoverables that are payable to, or to the order of, the Ceding Company and
received by the Reinsurer under this Agreement, whether they are delivered to
the Lockbox or otherwise transferred and delivered by the Ceding Company to the
Reinsurer.
SECTION 3.13 REINSURER'S SECURITY INTEREST.
(a) To the extent that the assignment of Recoverables pursuant to Section 3.1(b)
is not recognized as a present sale and assignment, is not valid or is
recharacterized as a pledge rather than a lawful conveyance of ownership to the
Reinsurer, the Ceding Company hereby grants to the Reinsurer a security interest
in (i) all of the Ceding Company's right, title and interest (legal, equitable
or otherwise), if any, to all Recoverables and all amounts and assets (including
the Custodial Funds) held in, or investments thereof credited to, the Lockbox
Accounts and the Custodial Account that are assigned to the Reinsurer hereunder
as Recoverables and all proceeds of any and all of the foregoing and (ii) to the
extent the Ceding Company is deemed to be the owner thereof, the Lockbox
Accounts and the Custodial Account (collectively, the "Collateral") to secure
all of the Ceding Company's obligations under this Agreement (including without
limitation any obligation of the Ceding Company to pay the Terminal Settlement
under Article IX). All costs and expenses incurred in connection with obtaining
a first priority perfected security interest shall be borne by the Reinsurer.
The Ceding Company hereby represents to the Reinsurer that as of the date hereof
it has not granted any security interest in any Collateral to any Person other
than as contemplated under this Section and during the term of this Agreement
the Ceding Company will not grant any security interest in any Collateral to any
Person other than the Reinsurer.
(b) Upon the failure of the Ceding Company to fully perform and comply with any
of its material obligations under this Agreement (including, without limitation,
under Sections 3.4 and 9.4), which failure is not caused by the Reinsurer (or
one of its Affiliates) as Administrator and remains uncured 10 days after
written notice thereof is received by the Ceding Company, and subject to Section
3.13(c), the Reinsurer shall have, in addition to all other rights under this
Agreement or under Applicable Law, the following rights:
(i) the right to exercise all rights and remedies granted a secured party
under the UCC, as though all the Collateral constituted property subject to
a security interest under Article 9 thereof;
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(ii) the right to set off against any and all of the Collateral any amounts
owed by the Ceding Company hereunder;
(iii) the right to intercept and retain monies and property in the Lockbox
Account and otherwise;
(iv) without giving rise to any right to double recovery under this Section
3.13 and Section 10.2, the right to reasonable attorneys' fees incurred
in connection with the enforcement of this Agreement or in connection
with disposition of the Collateral; and
(v) the right to dispose of the Collateral in accordance with the UCC.
(c) This Section 3.13 is being included in this Agreement to ensure that, if an
insolvency or other court determines that, notwithstanding the provisions of
this Agreement and the express intent of the Parties, the Ceding Company
retained ownership of, or any rights in the Collateral, the Reinsurer's rights
to the Collateral are protected with a first priority, perfected security
interest, and it is the intent of the Parties that this Section 3.13 be
interpreted as such. Upon the occurrence and during the continuation of a
Triggering Event or a Recapture Triggering Event, Sections 3.11 and 4.9 shall
apply.
(d) Nothing contained herein shall be construed to support the conclusion that
the Ceding Company will retain any ownership of or any rights in the Collateral
after the Effective Time or to support the conclusion that the Reinsurer will
not acquire full ownership thereof as of the Effective Time.
(e) On or prior to the Closing Date, the Ceding Company shall execute and
deliver and the Reinsurer is authorized to execute and deliver any and all
financing statements reasonably requested by the Reinsurer in order to perfect
the Reinsurer's title and security interest under Article 9 of the UCC to any
and all Recoverables and all other Collateral. From and after the Effective
Time, the Ceding Company shall do such further acts and things as the Reinsurer
may request in order that the security interest granted hereunder may be
maintained as a first perfected security interest, including, without
limitation, entry into a control agreement with each bank at which the Lockbox
is maintained.
SECTION 3.14 NOVATION OF COVERED INSURANCE POLICIES. Following the Effective
Time, if requested by the Reinsurer and subject to obtaining all applicable
approvals from any Person, the Ceding Company shall cooperate with the Reinsurer
and use its commercially reasonable efforts to novate any Covered Insurance
Policies or the Underlying Reinsurance Agreements, other than any Covered
Insurance Policies with amounts invested in Separate Accounts, from the Ceding
Company to the Reinsurer or a designated Affiliate of the Reinsurer. The Ceding
Company shall promptly advise the Reinsurer of any communications with respect
to any such
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proposed novation. All correspondence from either the Ceding Company or the
Reinsurer to any policyholder under any Covered Insurance Policy or to any
Underlying Company under any Underlying Reinsurance Agreement as applicable, in
connection with any such proposed novation shall be in a form approved by the
other Party; provided that any such approval shall not be unreasonably withheld,
conditioned or delayed. At the Reinsurer's instruction and expense and subject
to obtaining all applicable approvals from any Person, the Ceding Company shall
effect any such action with respect to any such proposed novation as the
Reinsurer shall reasonably request, including sending correspondence requesting
that a Covered Insurance Policy or Underlying Reinsurance Agreement be novated
to the Reinsurer or a designated Affiliate of the Reinsurer in a form approved
by the Reinsurer. The Parties shall share the cost of obtaining any consents
required for any novations of any of the Underlying Reinsurance Agreements
listed on Schedule 8.13(b) of the Business Disclosure Schedule delivered
pursuant to the Purchase Agreement on the same basis as provided in Section
8.13(b) of the Purchase Agreement and taking into account any amounts paid by
the parties to the Purchase Agreement under Section 8.13(b) of the Purchase
Agreement for purposes of applying any applicable caps to the parties
obligations in connection thereto. Reinsurer shall be responsible for the cost
of obtaining any other consents for the novations contemplated by this Section
3.14. Any Covered Insurance Policy or Underlying Reinsurance Agreement that is
novated to the Reinsurer pursuant to this Section shall cease to be a Covered
Insurance Policy or an Underlying Reinsurance Agreement upon the effectiveness
of such novation.
[REDACTED]
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[REDACTED]
ARTICLE IV.
LICENSES; REINSURANCE CREDIT
SECTION 4.1 LICENSES. At all times during the term of this Agreement, the
Reinsurer shall hold and maintain all licenses and authorizations required under
Applicable Law and otherwise take all action that may be necessary (i) so that
the Ceding Company may receive Reserve Credit, and (ii) to perform its
obligations hereunder.
[REDACTED]
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[REDACTED]
ARTICLE V.
OVERSIGHTS; COOPERATION; REGULATORY MATTERS
SECTION 5.1 OVERSIGHTS. Unintentional or inadvertent delays, errors or
omissions made in connection with this Agreement or any transaction hereunder
(i) shall not relieve either Party from any liability or obligation which would
have attached had such delay, error or omission not occurred; and (ii) both
Parties shall be restored as closely as possible to the positions they would
have occupied if no delay, error or omission had occurred, provided that, in all
cases, such error or omission is rectified as soon as reasonably practicable
after discovery by the Party making such error or omission or responsible for
such delay, and provided, further, that said responsible Party shall be
responsible for any additional liability or obligation which attaches as a
result.
45
SECTION 5.2 COOPERATION. Each Party hereto shall cooperate fully with the other
in all reasonable respects in order to accomplish the objectives of this
Agreement, including making available to each their respective officers,
employees and agents for interviews and meetings with Governmental Bodies and
furnishing any additional assistance, information and documents as may be
reasonably requested by a party from time to time.
SECTION 5.3 REGULATORY MATTERS. Subject to the provisions of Article X and
solely to the extent not otherwise covered by the Administrative Services
Agreement, if the Ceding Company or the Reinsurer receives notice of, or
otherwise becomes aware of, any inquiry, investigation or proceeding from or at
the direction of a Governmental Body relating to or affecting the Covered
Insurance Policies that would reasonably be expected to have an adverse effect
on the other Party, the Ceding Company or the Reinsurer, as applicable, shall
promptly notify the other Party thereof, whereupon the Parties, at their own
expense, shall cooperate in good faith and use their respective commercially
reasonable efforts to resolve such matter in a mutually satisfactory manner, in
light of all the relevant business, regulatory and legal facts and
circumstances.
ARTICLE VI.
DAC TAX
SECTION 6.1 ELECTION. The Ceding Company and the Reinsurer jointly agree to the
deferred acquisition cost Tax election pursuant to Section 1.848-2(g)(8) of the
Treasury Regulations issued under Section 848 of the Code, each as in effect as
of the Effective Time. In accordance with, and in furtherance of, that election:
(a) The Party with the net positive consideration for this Agreement for each
taxable year shall capitalize specified policy acquisition expenses with respect
to this Agreement without regard to the general deductions limitation of Code
Section 848(c)(1); and
(b) 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.
(c) Both Parties agree to make such election by timely attaching to their
federal income Tax Returns the schedule contemplated by Treasury Regulation
Section 1.848-2(g)(8)(ii).
SECTION 6.2 DEFINITIONS. As used in this Article, the terms "net
consideration," "net positive consideration," "specified policy acquisition
expenses," and "general deductions limitation" are defined by reference to
Treasury Regulation Section 1.848-2 and Code Section 848, in effect as of the
Effective Time.
46
SECTION 6.3 EXCHANGE OF INFORMATION. The method and timing of the exchange of
information contemplated by Section 6.1(b) shall be as follows:
(a) The Reinsurer shall submit a schedule to the Ceding Company by May 1 of each
year of its calculation of the net consideration for the preceding calendar
year.
(b) The Ceding Company may contest such calculation by providing an alternative
calculation to the Reinsurer in writing within 30 days of the Ceding Company's
receipt of the Reinsurer's calculation. If the Ceding Company does not so notify
the Reinsurer, the Ceding Company shall report the net consideration as
determined by the Reinsurer.
(c) If the Ceding Company contests the Reinsurer's calculation of the net
consideration, the Parties shall act in good faith to reach an agreement as to
the correct amount within 30 days of the date the Ceding Company submits its
alternative calculation. If the Reinsurer and the Ceding Company do not reach
agreement on the net consideration within such 30-day period, then the net
consideration for such year shall be determined by an independent accounting
firm acceptable to both the Reinsurer and the Ceding Company within 20 days
after the expiration of such 30-day period.
(d) The Parties shall attach the final schedule to their respective federal
income Tax Returns for each taxable year in which consideration is transferred
under this Agreement. The schedule shall identify this Agreement and restate the
election described in this Article and shall be signed by both Parties.
SECTION 6.4 EFFECTIVENESS. The Tax election described in Section 6.1 shall
first become effective for the taxable year that includes the Effective Time and
shall remain in effect for all years for which this Agreement remains in effect.
SECTION 6.5 UNITED STATES TAX STATUS REPRESENTATION. Each of the Parties
represents and warrants that it is subject to United States taxation under the
provisions of Subchapter L of Chapter 1 of Subtitle A of the Code.
ARTICLE VII.
INSOLVENCY
SECTION 7.1 INSOLVENCY OF THE CEDING COMPANY.
(a) In the event of the insolvency of the Ceding Company, all reinsurance made,
ceded, renewed or otherwise becoming effective under this Agreement shall be
payable by the Reinsurer directly to the Ceding Company or to its statutory
liquidator, receiver or statutory successor on the basis of the liability of the
Ceding Company under the
47
Covered Insurance Policies without diminution because of the insolvency of the
Ceding Company, except to the extent (i) paid by the Reinsurer to a Payee in
accordance with Section 8.1 or (ii) the Reinsurer has, with the consent of the
applicable policyholder or Underlying Company, assumed any such Covered
Insurance Policy or Underlying Reinsurance Agreement in substitution for the
obligations of the Ceding Company to such Person.
(b) It is understood, however, that in the event of the insolvency of the Ceding
Company, the liquidator, receiver or statutory successor of the Ceding Company
shall give written notice of the pendency of a claim against the Ceding Company
on a Covered Insurance Policy within a reasonable period of time after such
claim is filed in the insolvency proceedings and that during the pendency of
such claim the Reinsurer may investigate such claim and interpose, at its own
expense, in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Ceding Company or its liquidator,
receiver or statutory successor. It is further understood that the expense thus
incurred by the Reinsurer shall be chargeable, subject to Applicable Law,
against the Ceding Company as part of the expense of liquidation to the extent
of a proportionate share of the benefit which may accrue to the Ceding Company
solely as a result of the defense undertaken by the Reinsurer.
ARTICLE VIII.
CUT THROUGH AND NOVATIONS UPON RECAPTURE
SECTION 8.1 DIRECT PAYMENTS BY THE REINSURER. Subject to Applicable Law, in the
event of the insolvency of the Ceding Company, the Reinsurer shall pay, in
accordance with the Covered Insurance Policies or the Underlying Reinsurance
Agreements, directly to the named insureds, Underlying Company or their
designees entitled to receive payment thereunder (a "Beneficiary"), in each case
in accordance with and as required by the applicable Covered Insurance Policy or
Underlying Reinsurance Agreement (any such Beneficiary, a "Payee"), 100% of the
General Account Liabilities due and payable by the Reinsurer to the Ceding
Company under this Agreement with respect to such Covered Insurance Policy or
Underlying Reinsurance Agreement, subject to the terms, conditions, exclusions
and limitations of such Covered Insurance Policy or Underlying Reinsurance
Agreement, in each case without duplication of any amounts paid by any reinsurer
under any Reinsurer Existing Reinsurance Agreement directly to the Ceding
Company with respect to such Covered Insurance Policy or Underlying Reinsurance
Agreement pursuant to any endorsement or other provisions of the type
contemplated in Section 8.4(b). Any such payment by the Reinsurer shall
discharge the Ceding Company from its related payment obligation under the
subject Covered Insurance Policy or Underlying Reinsurance Agreement to the
extent of such payment and shall be treated as a payment by the Ceding Company
for all purposes of such Covered Insurance Policy or Underlying Reinsurance
Agreement and related documentation and otherwise. In the event of a payment by
the Reinsurer pursuant to this Article VIII, the Reinsurer shall be entitled to
all rights of the Ceding Company under the Covered Insurance Policy, in each
case to the extent of payments under this Article VIII. The Ceding Company shall
use commercially reasonable efforts to assist the Reinsurer in pursuing such
rights.
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SECTION 8.2 SATISFACTION AND DISCHARGE. Any payment by the Reinsurer pursuant
to this Article VIII shall be, to the extent of the payment, in substitution,
satisfaction and discharge of the Reinsurer's obligations to the Ceding Company,
or to its receiver, liquidator, rehabilitator, conservator or similar Person or
statutory successor, under this Agreement. Neither this Article VIII, nor any
other provision of this Agreement nor any applicable Covered Insurance Policy or
Underlying Reinsurance Agreement, shall be construed in a manner which would
subject the Ceding Company or the Reinsurer to liability for duplicative payment
of Reinsured Liabilities reinsured under this Agreement. When there is a payment
made by the Reinsurer under this Article VIII, the Reinsurer shall promptly
furnish the Ceding Company with a report as to all Reinsured Liabilities paid
pursuant to this Article VIII in connection with delivery of the Settlement
Statement under Section 3.4. It is the intent of the Parties to comply with
Section 38a-88-10 of the Connecticut Insurance Regulations and any successor
statute or amendments thereto. To the extent Section 8.1 or Section 8.2 is
deemed to be inconsistent with such regulation, Section 7.1(a) shall be amended
and restated without any further action by the Parties as follows:
"(a) In the event of the insolvency of the Ceding Company, all reinsurance
made, ceded, renewed or otherwise becoming effective under this Agreement
shall be payable by the Reinsurer directly to the Ceding Company or to its
statutory liquidator, receiver or statutory successor on the basis of the
liability of the Ceding Company under the Covered Insurance Policies
without diminution because of the insolvency of the Ceding Company, except
to the extent the Reinsurer has, with the consent of the applicable
policyholder or Underlying Company, assumed any such Covered Insurance
Policy or Underlying Reinsurance Agreement in substitution for the
obligations of the Ceding Company to such Person."
SECTION 8.3 REDOMESTICATION OF THE CEDING COMPANY. The Ceding Company covenants
and agrees that it shall not redomesticate to a state unless the Applicable Laws
of such state contain an insolvency clause substantially similar to Connecticut
Insurance Regulation Section 38a-88-10.
[REDACTED]
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[REDACTED]
ARTICLE IX.
DURATION; RECAPTURE
SECTION 9.1 DURATION. This Agreement shall continue in force until such time as
(i) the Ceding Company's liabilities and obligations arising out of or related
to all Covered Insurance Policies reinsured hereunder are terminated in
accordance with their respective terms, or (ii) the Ceding Company has elected
to recapture the reinsurance of Covered Insurance Policies in full in accordance
with Section 9.3(a) and the Terminal Settlement has been completed in accordance
with Section 9.4, or (iii) the Reinsurer has elected to terminate this Agreement
in accordance with Section 9.3(b) and the Terminal Settlement has been completed
in accordance with Section 9.4.
SECTION 9.2 SURVIVAL. Notwithstanding the other provisions of this Article IX,
the terms and conditions of Articles I, IX and X and the provisions of Sections
11.1, 11.3, 11.5, 11.8 and 11.9 shall remain in full force and effect after the
termination or recapture of this Agreement. In no event shall the termination of
this Agreement affect the status of any Recoverables received and attributable
to any Accounting Period (or a portion thereof) prior to such termination as
provided in Sections 3.12 and 3.13.
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SECTION 9.3 TERMINATION AND RECAPTURE.
(a) Upon the occurrence of a Recapture Triggering Event, the Ceding Company
shall have the right, but not the obligation, to recapture all, and not less
than all, of the reinsurance ceded under this Agreement, by providing the
Reinsurer with written notice of its intent to effect recapture. Recapture of
the Covered Insurance Policies shall be effective on the 10th day following the
day on which the Ceding Company has provided the Reinsurer with such notice (the
"Recapture Date").
(b) Upon the occurrence of a Termination Event, the Reinsurer shall have the
right, but not the obligation, to terminate this Agreement by providing the
Ceding Company with written notice of its intent to terminate. Termination of
this Agreement shall be effective on the date specified in such notice (the
"Termination Date"). Upon termination of this Agreement pursuant to this Section
9.3(b), the Ceding Company shall be deemed to have recaptured all Reinsured
Liabilities. Recapture of the Covered Insurance Policies shall be effective on
the Termination Date.
(c) Upon recapture by the Ceding Company pursuant to Section 9.3(a) or Section
9.3(b), the Ceding Company will only recapture liabilities and obligations
arising under the express terms of the Covered Insurance Policies and will not
be liable for any Reinsurer Extra-Contractual Obligations arising before the
Recapture Date or Termination Date, as applicable or if arising after the
Recapture Date or Termination Date, as applicable, to the extent attributable to
a direction or request of the Reinsurer or any of its Affiliates.
(d) Following a termination or recapture pursuant to this Section 9.3, subject
to the payment obligations described in Section 9.4, both the Ceding Company and
the Reinsurer will be fully and finally released from all rights and obligations
under this Agreement in respect of the Covered Insurance Policies, other than
any payment obligations incurred hereunder prior to the Recapture Date or
Termination Date but still unpaid on such date. Following the consummation of
the recapture or termination, (i) no additional Recoverables or other amounts
payable under such Covered Insurance Policies shall be payable to the Reinsurer
hereunder nor, for the avoidance of doubt, shall the Reinsurer have any further
right to receive any Recoverables, (ii) the Reinsurer (including in its capacity
as Administrator) shall be relieved of on-going responsibilities for servicing
the Covered Insurance Policies in accordance with the terms of the
Administrative Services Agreement, and (iii) the Reinsurer shall have no further
obligations with respect to payment of claims, reinsurance of Reinsured
Liabilities or any other obligations whatsoever under this Agreement except for
obligations under the provisions that expressly survive termination as provided
in Section 9.2. Upon a recapture or termination pursuant to this Section 9.3,
the Reinsurer will sell, assign, transfer and deliver to the Ceding Company,
effective as of the Recapture Date or Termination Date, as applicable, all of
Reinsurer's right, title and interest in the Recoverables and the security
interest granted pursuant to Section 3.13 shall be automatically released.
52
(e) Notwithstanding the remedies contemplated by this Article IX, Article IV or
elsewhere in this Agreement or the other Transaction Agreements, if a Recapture
Triggering Event has occurred, the Ceding Company may, in its sole discretion,
require direct payment by the Reinsurer of any sum in default under this
Agreement or any other Transaction Agreement in lieu of exercising its recapture
rights under this Article IX, and it shall be no defense to any such claim that
the Ceding Company might have had other recourse.
SECTION 9.4 PAYMENTS ON TERMINATION OR RECAPTURE. In connection with a
termination or recapture pursuant to Section 9.3, the Reinsurer shall prepare a
settlement statement within 15 calendar days of the Recapture Date or the
Termination Date (the "Terminal Settlement Statement") setting forth the
terminal settlement for the Terminal Accounting Period (the "Terminal
Settlement"). In the case of recapture by the Ceding Company pursuant to Section
9.3(a), the Terminal Settlement shall be calculated in accordance with Exhibit
C-1. In the case of a termination by the Reinsurer pursuant to Section 9.3(b),
the Terminal Settlement shall be calculated in accordance with Exhibit C-2.
[REDACTED]
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SECTION 9.5 ASSIGNMENT OF REINSURER EXISTING REINSURANCE AGREEMENTS FOLLOWING
RECAPTURE. In connection with the recapture under Section 9.3 of this Agreement,
to the extent any Reinsurer Existing Reinsurance Agreements are assignable
without consent of the reinsurer thereof, effective as of the Termination Date
or Recapture Date, as applicable, each such Reinsurer Existing Reinsurance
Agreement shall be assigned automatically to the Ceding Company so that the
Ceding Company shall have the benefits and obligations under each such Reinsurer
Existing Reinsurance Agreement. In addition, as soon as practicable after
receipt of a notice of termination or recapture pursuant to Section 9.3 and
following the Termination Date or Recapture Date, as applicable, the Parties
shall cooperate and use commercially reasonable efforts to seek to novate or
assign the Reinsurer Existing Reinsurance Agreements to the Ceding Company with
effect as of the Termination Date or Recapture Date, as applicable, whereupon
the Ceding Company shall have the benefits and obligations under such Reinsurer
Existing Reinsurance Agreements, in each case as of the Termination Date or
Recapture Date, as applicable.
SECTION 9.6 EQUITABLE REMEDIES. The Parties agree that irreparable harm for
which damages will not provide a full and effective remedy will result if the
provisions of this Article IX are not strictly and timely enforced and that, in
addition to the rights under this Article IX, the rights under Article X, and
any legal remedies the Parties may have, equitable remedies including but not
limited to prohibitory injunction, mandatory injunction, preliminary injunction,
emergency injunction, restraining order and specific performance shall be
appropriate relief in enforcing these provisions and maintaining this Agreement
in full force and effect. The Parties expressly waive the defense that a remedy
in damages alone will be adequate or that equitable remedies, including
injunction and specific performance are not appropriate for any reason at law or
equity. For purposes of enforcing the provisions of this Article IX, the Parties
agree that the appropriate forum for determining such matters shall be the
courts of the Ceding Company's state of domicile, and the Parties hereby submit
to the jurisdiction and venue of such courts.
ARTICLE X.
INDEMNIFICATION; DISCLAIMER
SECTION 10.1 REINSURER'S OBLIGATION TO INDEMNIFY. The Reinsurer hereby agrees
to indemnify, defend and hold harmless the Ceding Company and its Affiliates and
their respective officers, directors, stockholders, employees, authorized
Representatives, successors and assigns (collectively, the "Ceding Company
Indemnified Parties") from and against and pay and reimburse any and all Losses
imposed on, sustained, incurred or suffered by any of the Ceding Company
Indemnified Parties resulting from, arising out of or relating to (whether or
not arising from a Third-Party Claim) (i) any breach, violation or
non-fulfillment by the Reinsurer of the covenants and agreements of the
Reinsurer contained in this Agreement, (ii) the Reinsured Liabilities and (iii)
any successful enforcement of this indemnity.
SECTION 10.2 CEDING COMPANY'S OBLIGATION TO INDEMNIFY. The Ceding Company
hereby agrees to indemnify, defend and hold harmless the Reinsurer and its
Affiliates and their respective officers, directors, stockholders, employees,
authorized Representatives, successors
54
and assigns (collectively, the "Reinsurer Indemnified Parties") from and against
and pay and reimburse any and all Losses imposed on, sustained, incurred or
suffered by any of the Reinsurer Indemnified Parties resulting from, arising out
of or relating to (whether or not arising from a Third-Party Claim) to the
extent arising from (i) any breach, violation or non-fulfillment by the Ceding
Company of the covenants and agreements of the Ceding Company contained in this
Agreement, (ii) any Ceding Company Extra-Contractual Obligations, or (iii) any
successful enforcement of this indemnity; provided that any indemnification of
the Reinsurer Indemnified Parties with respect to Product Tax Non-Compliance
shall be solely as provided in Section 12.6 of the Purchase Agreement.
SECTION 10.3 NOTICE OF CLAIM; DEFENSE.
(a) If (i) any non-affiliated third party or Governmental Body institutes or
asserts any Action that may give rise to Losses for which a Party (an
"Indemnifying Party") may be liable for indemnification under this Article X (a
"Third-Party Claim") or (ii) any Person that may be entitled to indemnification
under this Agreement (an "Indemnified Party") desires to make a claim not
involving a Third-Party Claim to be indemnified by an Indemnifying Party that
does not involve a Third-Party Claim, then the Indemnified Party shall promptly
send to the Indemnifying Party a written notice specifying the nature of such
claim and a good faith estimate of the amount of all related Losses to the
extent they are ascertainable (a "Claim Notice"). The Indemnifying Party shall
not be relieved from any of its indemnification obligations under this Article X
as a result of a failure of the Indemnified Party to provide a Claim Notice,
except to the extent that it is materially prejudiced by such failure.
(b) The Indemnifying Party may, by notice delivered within 20 Business Days of
the receipt of a Claim Notice with respect to a Third-Party Claim, assume the
defense and control of such Third-Party Claim (at the expense of such
Indemnifying Party). The Indemnified Party may take any actions reasonably
necessary to defend any Third-Party Claim prior to the time that it receives
notice from the Indemnifying Party as contemplated by the preceding sentence.
The Indemnifying Party shall not be entitled to assume or maintain control of
the defense of any Third-Party Claim and shall pay the reasonable fees and
expenses of counsel retained by the Indemnified Party if (i) the Third-Party
Claim relates to or arises in connection with any criminal proceeding, action,
indictment, allegation or investigation against the Indemnified Party or (ii)
the Third-Party Claim would reasonably be expected to result in an injunction or
equitable relief against the Indemnified Party that would, in each case, have a
material effect on the operation of the business of such Indemnified Party or
any of its Affiliates.
(c) Subject to Section 10.3(b), in the event of a Third-Party Claim, if the
Indemnifying Party assumes the defense of a Third-Party Claim, the Indemnifying
Party may elect to retain counsel reasonably acceptable to the Indemnified
Parties to represent such Indemnified Parties in connection with such Action and
shall pay the fees, charges and disbursements of such counsel. Subject to
Section 10.3(b), if the Indemnifying Party so elects, the Indemnified Parties
may participate, at their own expense and through legal counsel of their choice,
in any such Action; provided that (i) the Indemnifying Party shall control the
defense of
55
the Indemnified Parties in connection with such Action and (ii) the Indemnified
Parties and their counsel shall reasonably cooperate with the Indemnifying Party
and its counsel in connection with such Action. To the extent such action can be
taken in a way that does not unreasonably jeopardize the attorney-client
privilege: (i) the Indemnified Party's right to participate in the defense of
any Action shall include the right to attend all significant internal meetings,
all meetings with representatives of plaintiffs, hearings and the like; and (ii)
counsel for an Indemnified Party also shall be given a reasonable opportunity to
comment upon all memoranda of law, pleadings and briefs and other documents
relating to the Third-Party Claim, and the Indemnifying Party and its counsel
shall give reasonable consideration to the comments of counsel for the
Indemnified Party. The Indemnifying Party shall not settle any such Action
without the relevant Indemnified Parties' prior written consent, unless the
terms of such settlement (A) provide for no relief other than the payment of
monetary damages, (B) involve no finding or admission of any breach or violation
by any Indemnified Party and (C) include an express unconditional release of
each Indemnified Party from all Liability arising from such Action.
Notwithstanding the foregoing, if the Indemnifying Party does not promptly
retain counsel and assume control of such defense, then the Indemnified Parties
may retain counsel reasonably acceptable to the Indemnifying Party in connection
with such Action and assume control of the defense in connection with such
Action. Under no circumstances will the Indemnifying Party have any liability in
connection with any settlement of any Action that is entered into without its
prior written consent (such consent not to be unreasonably withheld, delayed or
conditioned).
(d) From and after the delivery of a Claim Notice involving a Third-Party Claim,
at the reasonable request of the Indemnifying Party, each Indemnified Party
shall grant the Indemnifying Party and its counsel, experts and Representatives
full access, during normal business hours, to the books, records, personnel and
properties of the Indemnified Party to the extent reasonably related to such
Claim Notice at no cost to the Indemnifying Party (other than for reasonable
out-of-pocket expenses of the Indemnified Parties).
(e) In the event any Indemnifying Party receives a Claim Notice from an
Indemnified Party that does not involve a Third-Party Claim, the Indemnifying
Party shall notify the Indemnified Party within 20 Business Days following its
receipt of such notice whether the Indemnifying Party disputes its liability to
the Indemnified Party under this Article X.
SECTION 10.4 NO DUPLICATION; EXCLUSIVE REMEDY.
(a) To the extent that a Reinsurer Indemnified Party or a Ceding Company
Indemnified Party has received payment in respect of a Loss pursuant to the
provisions of any other Transaction Agreement, such Reinsurer Indemnified Party
or Ceding Company Indemnified Party shall not be entitled to indemnification for
such Loss under this Agreement to the extent of such payment.
56
(b) Except (i) with respect to claims alleging fraud, (ii) as otherwise provided
under this Agreement (including the right to recapture and equitable remedies in
addition to the indemnification under Article X) or (iii) the provisions of any
Transaction Agreement, from and after the Closing, the exclusive remedy of the
Reinsurer, the Reinsurer Indemnified Parties, the Ceding Company and the Ceding
Company Indemnified Parties in connection with this Agreement (and any
certificate or instrument delivered hereunder) and the transactions contemplated
hereby (whether under this Agreement or arising under Applicable Law) shall be
as provided in this Article X. In furtherance of the foregoing, each of the
Reinsurer, on behalf of itself and each other Reinsurer Indemnified Party, and
the Ceding Company, on behalf of itself and each other Ceding Company
Indemnified Party, hereby waives, from and after the Closing, to the fullest
extent permitted under Applicable Law, any and all rights, claims and causes of
action (other than claims of, or causes of action arising from, fraud) it may
have against the Ceding Company or any of its Affiliates or Representatives and
the Reinsurer or any of its Affiliates or Representatives, as the case may be,
arising under or based upon this Agreement or any certificate or instrument
delivered in connection herewith, except (x) pursuant to the indemnification
provisions set forth in this Article X or (y) as otherwise provided under this
Agreement or the provisions of any Transaction Agreement.
SECTION 10.5 MITIGATION AND LIMITATION ON SET-OFF. The Reinsurer and the Ceding
Company shall cooperate with each other with respect to resolving any claim or
liability with respect to which one Party is obligated to indemnify the other
Party under this Article X, including by making commercially reasonable efforts
to mitigate such claim or liability, to the extent required by Applicable Law.
Neither the Reinsurer nor the Ceding Company shall have any right to set off any
unresolved indemnification claim pursuant to this Article X against any payment
due pursuant to Article III and Section 9.4 or any Transaction Agreement.
SECTION 10.6 RECOVERY BY INDEMNIFIED PARTY.
(a) In any case where an Indemnified Party recovers from a third party not
affiliated with such Indemnified Party any amount in respect of any Loss for
which an Indemnifying Party has actually reimbursed it pursuant to this Article
X, such Indemnified Party shall promptly pay over to the Indemnifying Party the
amount so recovered (net of any out-of-pocket expenses incurred by such
Indemnified Party in collecting such amount), but not in excess of the sum of
(i) any amount previously paid by the Indemnifying Party to or on behalf of the
Indemnified Party in respect of such claim and (ii) any amount expended by the
Indemnifying Party in pursuing or defending any claim arising out of such
matter.
(b) If any portion of Losses to be reimbursed by the Indemnifying Party pursuant
to this Article X could be recovered from a third party not affiliated with the
relevant Indemnified Party (including under any applicable third-party insurance
coverage) based on the underlying claim or demand asserted against such
Indemnifying Party, then the Indemnified Party shall promptly give notice
thereof to the Indemnifying Party and, upon the request of the Indemnifying
Party, shall use commercially reasonable efforts to collect the maximum amount
recoverable from such third party, in which event the Indemnifying Party shall
reimburse the
57
Indemnified Party for all reasonable costs incurred in connection with such
collection. If any portion of Losses actually paid by the Indemnifying Party
pursuant to this Article X could have been recovered from a third party not
affiliated with the relevant Indemnified Party (including under any applicable
third-party insurance coverage) based on the underlying claim or demand asserted
against such Indemnifying Party, then the Indemnified Party shall transfer, to
the extent transferable, such of its rights to proceed against such third party
as are necessary to permit the Indemnifying Party to recover from such third
party any amount actually paid by the Indemnifying Party pursuant to this
Article X.
SECTION 10.7 WAIVER OF DUTY OF UTMOST GOOD FAITH. In recognition that each
Party has consummated the transactions contemplated by this Agreement and the
Transaction Agreements to which it is a party, based on mutually negotiated
representations, warranties, covenants, remedies and other terms and conditions
as are fully set forth herein and therein, the Ceding Company and the Reinsurer
absolutely and irrevocably waive resort to the duty of "utmost good faith" or
any similar principle in connection with the formation or performance of this
Agreement.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1 NOTICES. Except as otherwise agreed by the Parties, all notices,
requests, demands and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given (a) on the date of service
if served personally on the Party to whom notice is to be given, (b) on the day
of transmission if sent via facsimile transmission to the facsimile number given
below, and telephonic confirmation of receipt is obtained promptly after
completion of transmission, or (c) on the Business Day after delivery to an
overnight courier (such as Federal Express) or an overnight mail service (such
as the Express Mail service) maintained by the United States Postal Service, to
the Party as follows:
To the Ceding Company:
Hartford Life and Annuity Insurance Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: President
With concurrent copies (which will not constitute notice) to:
The Hartford
Xxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Ceded Reinsurance & General Counsel
58
Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: B. Xxxxx Xxxxxx
To the Reinsurer:
The Prudential Insurance Company of America
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Chief Legal Officer, Individual Life Insurance
Fax: (000) 000-0000
With a concurrent copy (which will not constitute notice) to:
Debevoise & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxx
or to such other address as such Party may indicate by a notice delivered to the
other Party hereto.
SECTION 11.2 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and
Schedules referred to herein, the Purchase Agreement, the Administrative
Services Agreement, the Transition Services Agreement, the Trust Agreement and
the other documents delivered pursuant hereto and thereto, constitute the entire
agreement among the Parties hereto with respect to the subject matter hereof and
supersede all prior representations, warranties, negotiations, discussions,
writings, agreements, understandings and letters of intent between them with
respect thereto, none of which shall have any further force and effect for any
purpose. This Agreement may not be amended, modified or supplemented except by a
written instrument signed by an authorized Representative of each of the Parties
hereto or their respective successors in interest.
SECTION 11.3 GOVERNING LAW AND JURISDICTION. This Agreement shall be governed
in all respects, including validity, interpretation and effect, by the laws of
the Ceding Company's state of domicile, without regard to principles of
conflicts of law thereof that would result in the application of the laws of a
different jurisdiction. Except as contemplated in the definition of Unamortized
Portion of the Ceding Commission, Articles IV and IX or in Section 2.4 of the
Purchase Agreement, each of the Parties irrevocably agrees that any and all
Actions arising out of, relating to or in connection with this Agreement or its
subject matter and the rights and obligations arising hereunder, or for
recognition and enforcement of any settlement or judgment in respect of this
Agreement and the rights and obligations arising hereunder brought by the other
Party or its successors or assigns, shall be brought and determined exclusively
in the courts of the State of
New York located in the Borough of Manhattan, The
City of
New York or in the
59
courts of the United States of America for the Southern District of
New York.
Each of the Parties agrees that mailing of process or other papers in connection
with any such Action in the manner provided in Section 11.1 or in such other
manner as may be permitted by Applicable Laws, will be valid and sufficient
service thereof. Each of the Parties hereby irrevocably submits with regard to
any such Action for itself and in respect of its property, generally and
unconditionally, to the personal jurisdiction of the aforesaid courts and agrees
that it will not bring any Action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court or tribunal other than
the aforesaid courts. Each of the Parties hereto hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any Action with respect to this Agreement and the rights and obligations
arising hereunder, or for recognition and enforcement of any judgment in respect
of this Agreement and the rights and obligations arising hereunder (a) any claim
that it is not personally subject to the jurisdiction of the above named courts
for any reason other than the failure to serve process in accordance with this
Agreement, (b) any claim that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (c) to the fullest extent permitted by Applicable Law, any claim that (i)
the Action in such court is brought in an inconvenient forum, (ii) the venue of
such Action is improper or (iii) this Agreement, or the subject matter hereof,
may not be enforced in or by such courts. In order to facilitate the
comprehensive resolution of related disputes, and upon request of any Party to
any Action, the court may consolidate the Action with any other Action relating
to this Agreement, the Purchase Agreement or any other Ancillary Agreement and
the Parties hereby agree not to oppose any request by the other Party to
consolidate any such Action with another Action relating to this Agreement, the
Purchase Agreement or any other Ancillary Agreement.
SECTION 11.4 NO THIRD PARTY BENEFICIARIES. Except as otherwise expressly set
forth in any provision of this Agreement, including with respect to the Ceding
Company Indemnified Parties and the Reinsurer Indemnified Parties, nothing in
this Agreement, expressed or implied, is intended or shall be construed to
confer upon any Person, other than the Parties and their respective successors
and permitted assigns, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
SECTION 11.5 EXPENSES. Except as otherwise provided herein, the Parties hereto
shall each bear their respective expenses incurred in connection with the
negotiation, preparation, execution, and performance of this Agreement and the
transactions contemplated hereby, including all fees and expenses of counsel,
actuaries and other Representatives.
SECTION 11.6 COUNTERPARTS. This Agreement may be executed by the Parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the Parties hereto. Each
counterpart may be delivered by facsimile or electronic mail transmission, which
transmission shall be deemed delivery of an originally executed document.
60
SECTION 11.7 SEVERABILITY. Any term or provision of this Agreement which 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, that provision shall be
interpreted to be only so broad as is enforceable.
SECTION 11.8 WAIVER OF JURY TRIAL; PUNITIVE DAMAGES. EACH PARTY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
WHETHER MADE BY CLAIM, COUNTERCLAIM, THIRD-PERSON CLAIM OR OTHERWISE. EACH PARTY
HERETO ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS
SECTION. EACH PARTY ALSO IRREVOCABLY WAIVES ANY RIGHT TO PUNITIVE DAMAGES,
EITHER PURSUANT TO COMMON LAW OR STATUTE, IN EACH CASE IN ANY LEGAL PROCEEDINGS
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY (BUT NOT AS TO ANY ACTION BY ONE PARTY AGAINST THE OTHER SEEKING
INDEMNIFICATION FOR A THIRD PARTY CLAIM AGAINST THE PARTY INITIATING THE ACTION,
TO THE EXTENT THAT SUCH DAMAGES MAY BE RECOVERABLE AS PART OF THE
INDEMNIFICATION BY THE INDEMNIFIED PARTY).
SECTION 11.9 TREATMENT OF CONFIDENTIAL INFORMATION.
(a) The Parties agree that, other than as contemplated by this Agreement or any
Transaction Agreement and to the extent permitted or required to implement the
transactions contemplated by this Agreement and the other Transaction
Agreements, the Parties will keep confidential and will not use or disclose the
other Party's Confidential Information and the terms and conditions of this
Agreement, including the exhibits and schedules hereto, except (x) as otherwise
required by Applicable Law or any order or ruling of any state insurance
regulatory authority or any other Governmental Body, (y) as may be required to
be disclosed in the financial statements of such Party or any of its Affiliates
or (z) such disclosure as may be required in connection with any dispute
resolution proceeding between the Parties in respect hereof. For clarity,
Business Records shall be deemed to be Confidential Information of the Reinsurer
and its Affiliates and subject to the confidentiality obligations in Section 8.6
of the Purchase Agreement.
(b) The confidentiality obligations contained in this Agreement shall not apply
to the federal Tax structure or federal Tax treatment of this Agreement and each
Party hereto may disclose to any and all persons, without limitation of any
kind, the federal Tax structure and federal Tax treatment of this Agreement;
provided, that such disclosure may not be
61
made until the earliest of (x) the date of the public announcement of
discussions relating to this Agreement, (y) the date of the public announcement
of this Agreement, or (z) the date of the execution of this Agreement. The
preceding sentence is intended to cause this Agreement to be treated as not
having been offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Code, and shall be construed in a manner
consistent with such purpose. Subject to the provision with respect to
disclosure in the first sentence of this subsection (b), each Party hereto
acknowledges that it has no proprietary or exclusive rights to the federal Tax
structure of this Agreement or any federal Tax matter or federal Tax idea
related to this Agreement.
SECTION 11.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective successors and permitted
assigns. Except as provided below in this Section 11.10, neither Party may
assign any of its rights, duties or obligations hereunder without the prior
written consent of the other Party and any attempted assignment in violation of
this provision shall be invalid AB INITIO; provided, however, that this
Agreement shall inure to the benefit and bind those who, by operation of law,
become successors to the Parties, including any receiver or any successor,
merged or consolidated entity.
SECTION 11.11 WAIVERS. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, in writing at any time by the
Party or Parties entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this Agreement if, as to
any Party, it is authorized in writing by an authorized Representative of such
Party. The failure of any Party hereto to enforce at any time any provision of
this Agreement shall not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any part hereof or the right
of any Party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any
preceding or subsequent breach.
SECTION 11.12 INTERPRETATION. The table of contents, articles, titles, captions
and headings to sections herein are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement. The Schedules and Exhibits referred to herein are to be
construed with and as an integral part of this Agreement to the same extent as
if they were set forth verbatim herein. All references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they are deemed
to be followed by the words "without limitation". Unless the context otherwise
requires, the words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. All terms defined in this Agreement
have the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions in
this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine genders of such term.
Any agreement or instrument defined or referred to herein or any
62
agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented, including by
waiver or consent and references to all attachments thereto and instruments
incorporated therein. Any statute or regulation referred to herein means such
statute or regulation as amended, modified, supplemented or replaced from time
to time (and, in the case of statutes, includes any rules and regulations
promulgated under the statute), and references to any section of any statute or
regulation include any successor to the section. Any agreement referred to
herein include reference to all Exhibits, Schedules and other documents or
agreements attached thereto.
[The rest of this page intentionally left blank.]
63
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
on this 2 day of January, 2013.
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
By: /s/ [ILLEGIBLE]
-----------------------------------
Name: Xxxx M [ILLEGIBLE]
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: Second Vice President
[SIGNATURE PAGE TO XXX REINSURANCE AGREEMENT]
SCHEDULE 1.1(A)
SCHEDULED EXTRA-CONTRACTUAL OBLIGATIONS
[REDACTED]
SCHEDULE 1.1(B)
COVERED INSURANCE POLICY FORMS
[REDACTED]
SCHEDULE 1.1(C)
UNDERLYING REINSURANCE AGREEMENTS
KEY: XXX = HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
[REDACTED]
SCHEDULE 1.1(D)
EXCLUDED INSURANCE POLICIES
[Please see attached]
SCHEDULE 1.1(E)
ECONOMIC RESERVES ASSUMPTIONS AND METHODOLOGIES
[REDACTED]
SCHEDULE 1.1(F)
EXISTING REINSURANCE AGREEMENTS
[REDACTED]
1
SCHEDULE 1.1(G)
GUL BUSINESS COVERED INSURANCE POLICIES
The Covered Insurance Policies subject to NAIC Actuarial Guideline 38 "The
Application of the Valuation of Life Insurance Policies Model Regulation",
commonly known as "AXXX", as set forth below:
[REDACTED]
SCHEDULE 1.1(H)
SEPARATE ACCOUNTS
[REDACTED]
EXHIBIT A
FORM OF TRUST AGREEMENT
EXHIBIT B
SETTLEMENT STATEMENT
EXHIBIT C-1
TERMINAL SETTLEMENT UNDER SECTION 9.4 -- RECAPTURE BY CEDING COMPANY
[REDACTED]
EXHIBIT C-2
TERMINAL SETTLEMENT UNDER SECTION 9.4 -- TERMINATION BY REINSURER
[REDACTED]
EXHIBIT D
INVESTMENT GUIDELINES
[REDACTED]
1
EXHIBIT E
FORM OF CURE NOTICE
[REDACTED]
EXHIBIT F
FORM OF CURE ACKNOWLEDGMENT
[REDACTED]
EXHIBIT G
FORM OF TRUST /GUL TRUST WITHDRAWAL EVENT NOTICE
[REDACTED]
EXHIBIT H
FORM OF TRUST / GUL TRUST WITHDRAWAL EVENT ACKNOWLEDGEMENT
[REDACTED]
EXHIBIT I
FORM OF CUSTODIAL ACCOUNT CONTROL AGREEMENT
EXHIBIT J
FORM OF GUL TRUST AGREEMENT
