0001104659-13-010875.txt : 20130214
0001104659-13-010875.hdr.sgml : 20130214
20130214162335
ACCESSION NUMBER: 0001104659-13-010875
CONFORMED SUBMISSION TYPE: 485APOS
PUBLIC DOCUMENT COUNT: 6
FILED AS OF DATE: 20130214
DATE AS OF CHANGE: 20130214
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HARTFORD LIFE INSURANCE CO- SEPARATE ACCOUNT TWELVE
CENTRAL INDEX KEY: 0001264033
IRS NUMBER: 060974148
STATE OF INCORPORATION: CT
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-114404
FILM NUMBER: 13614361
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HARTFORD LIFE INSURANCE CO- SEPARATE ACCOUNT TWELVE
CENTRAL INDEX KEY: 0001264033
IRS NUMBER: 060974148
STATE OF INCORPORATION: CT
FILING VALUES:
FORM TYPE: 485APOS
SEC ACT: 1940 Act
SEC FILE NUMBER: 811-21433
FILM NUMBER: 13614362
485APOS
1
a13-1951_1485apos.txt
485APOS
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2013.
FILE NO. 333-114404
811-21433
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
POST-EFFECTIVE AMENDMENT NO. 15
TO THE FORM S-6
------------
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON
FORM N-8B-2
A. Exact name of trust: Hartford Life Insurance Company Separate Account Twelve
B. Name of depositor: Hartford Life Insurance Company
C. Complete address of depositor's principal executive offices:
P.O. Box 2999
Hartford, CT 06104-2999
D. Name and complete address of agent for service:
Christopher M. Grinnell, Esq.
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on pursuant to paragraph (a)(1) of Rule 485
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
E. Title and amount of securities being registered: Pursuant to Rule 24f-2
under the Investment Company Act of 1940, the Registrant will register an
indefinite amount of securities.
F. Proposed maximum aggregate offering price to the public of the securities
being registered: Not yet determined.
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PART I
GROUP VARIABLE FUNDING AGREEMENTS
SEPARATE ACCOUNT TWELVE
HARTFORD LIFE INSURANCE COMPANY
ADMINISTERED BY MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
This Prospectus describes information you should know before you purchase or
become a Participant under a group variable funding agreement (the "Contract" or
"Contracts"). Please read it carefully before you purchase or become a
Participant under the Contract.
Hartford Life Insurance Company issues the Contracts for use as an
investment vehicle for certain employee retirement or welfare benefit plans and
certain other plans or programs.
You or Participants allocate your plan Contribution to "Sub-Accounts."
Sub-Accounts are subdivisions of our Separate Account that we establish to keep
your Contract assets separate from our company assets. The Sub-Accounts purchase
shares of underlying mutual funds ("Funds") that have investment strategies
ranging from conservative to aggressive. You choose the Sub-Accounts that meet
your investment goals and risk tolerance. For more information on the underlying
Funds see the section entitled "The Funds".
The underlying Funds are retail mutual funds that are available to the
public. Because your Contributions purchase Sub-Accounts, YOU DO NOT INVEST
DIRECTLY IN ANY OF THE UNDERLYING FUNDS.
You or Participants may also allocate some or all of your Contributions to
the General Account option which pays interest at a rate that is guaranteed for
a certain period of time. The General Account option has certain restrictions.
The General Account option and these restrictions are not described in this
Prospectus. The General Account option is not required to be registered with the
Securities and Exchange Commission ("SEC"). Amounts allocated to the General
Account option are not segregated from our company assets like the assets of the
Separate Account.
If you decide to become a Contract Owner or a Participant, you should keep
this Prospectus for your records.
Although we file the Prospectus with the SEC, the SEC doesn't approve or
disapprove these securities or determine if the information in this Prospectus
is truthful or complete. Anyone who represents that the SEC does these things
may be guilty of a criminal offense.
This Prospectus can also be obtained from the SEC's website
(http://www.sec.gov).
This Contract IS NOT:
- A bank deposit or obligation
- Federally insured
- Endorsed by any bank or governmental agency
This Contract is not available for sale in all states.
--------------------------------------------------------------------------------
Prospectus Dated:
TABLE OF CONTENTS
SECTION PAGE
--------------------------------------------------------------------------------
DEFINITIONS 3
FEE TABLES 4
SUMMARY 8
PERFORMANCE RELATED INFORMATION 10
HARTFORD LIFE INSURANCE COMPANY 10
THE SEPARATE ACCOUNT 11
THE FUNDS 11
GENERAL ACCOUNT OPTION 13
CONTRACT CHARGES 14
Contingent Deferred Sales Charge 14
Installation Charge 14
Annual Maintenance Fee 14
Program and Administrative Charge 15
Premium Taxes 15
Charges Against the Funds 15
Plan Related Expenses 15
THE CONTRACTS 15
The Contracts Offered 15
Pricing and Crediting of Contributions 16
May I make changes in the amounts of my Contribution? 16
Can you transfer from one Sub-Account to another? 16
What is a Sub-Account Transfer? 16
What Happens When you Request a Sub-Account Transfer? 16
What Restrictions Are There on your Ability to Make a 17
Sub-Account Transfer?
Fund Trading Policies 17
How are you affected by frequent Sub-Account Transfers? 18
General Account Option Transfers 19
Telephone and Internet Transfers 19
How do I know what a Participant Account is worth? 19
How are the underlying Fund shares valued? 20
SURRENDERS 20
Full Surrenders 20
Partial Surrenders 20
Settlement Options 21
How do I request a Surrender? 21
FEDERAL TAX CONSIDERATIONS 21
A. General 21
B. Hartford and the Separate Account 21
C. Contract Purchases by Foreign Entities 21
MORE INFORMATION 22
Can a Contract be modified? 22
Can Hartford waive any rights under a Contract? 22
How Contracts Are Sold 22
Are there any material legal proceedings affecting the Separate 24
Account?
How may I get additional information? 24
GENERAL INFORMATION 24
Safekeeping of Assets 24
Experts 24
Non-Participating 24
Principal Underwriter 24
Additional Payments 25
PERFORMANCE RELATED INFORMATION 26
Total Return for all Sub-Accounts 26
Yield for Sub-Accounts 27
Money Market Sub-Accounts 27
Additional Materials 27
Performance Comparisons 27
2
DEFINITIONS
ACCUMULATION UNITS: If you allocate your Contribution to any of the
Sub-Accounts, we will convert those payments into Accumulation Units in the
selected Sub-Accounts. Accumulation Units are valued at the end of each
Valuation Day and are used to calculate the value of Participant Accounts
invested in the Sub-Accounts.
ADMINISTRATIVE OFFICE: Our overnight mailing address is: 1 Griffin Road North,
Windsor, CT 06095-1512. Our standard mailing address is: MassMutual Retirement
Services/Retirement Plans Service Center, P.O. Box 1583, Hartford, Connecticut
06144-1583.
ANNUAL MAINTENANCE FEE: An annual charge we deduct from each Participant Account
on a quarterly basis or on a full Surrender of a Participant Account. The charge
is deducted proportionately from the Sub-Accounts and any General Account value
in a Participant Account.
BENEFIT PAYMENT: Amounts Surrendered by the Contract Owner to pay benefits to a
Participant or beneficiary under the terms of the Plan. Amounts Surrendered for
transfer to the funding vehicle of another investment provider or because of the
termination of the Plan are not Benefit Payments.
CODE: The Internal Revenue Code of 1986, as amended.
CONTRACT OWNER OR YOU: The Employer or entity owning the Contract.
CONTRACT YEAR: A period of 12 months beginning with the effective date of the
Contract or with any anniversary of the effective date.
CONTRIBUTIONS: Amounts paid to us by the Contract Owner for investment in a
Contract.
EMPLOYER: An employer maintaining a retirement or welfare benefit plan or
similar plan or program for its employees.
GENERAL ACCOUNT: Our General Account that consists of all of our company assets,
including any money you have invested in the General Account option. The assets
in the General Account are available to the creditors of Hartford.
HARTFORD, WE OR US: Hartford Life Insurance Company.
INVESTMENT CHOICE: Any of the Sub-Accounts or the General Account option.
PARTICIPANT: Any employee or former employee of an Employer or other individual
with a Participant Account under a Contract.
PARTICIPANT ACCOUNT: An account under a Contract to which General Account values
and Sub-Account Accumulation Units are allocated on behalf of a Participant.
PLAN: An employee benefit plan or similar program that invests in a Contract.
PLAN RELATED EXPENSE: Amounts that you Surrender to pay certain administrative
expenses or other Plan related expenses including, fees paid to consultants,
auditors, third party administrators and other Plan services providers. Upon our
request, you must provide us with reasonable documentation that a Surrender is a
Plan Related Expense.
PREMIUM TAX: The tax or amount of tax, if any, charged by a state, federal, or
other governmental entity on Contributions or Contract values.
SUB-ACCOUNT VALUE: The value determined on any day by multiplying the number of
Accumulation Units by the Accumulation Unit value for that Sub-Account.
SURRENDER: Any withdrawal of Contract values.
SURRENDER VALUE: The amount we pay you if you terminate your Contract. The
Surrender Value is equal to the Contract value minus any applicable charges.
VALUATION DAY: Every day the New York Stock Exchange is open for trading. Values
of the Separate Account are determined as of the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern Time) on such days.
VALUATION PERIOD: The time span between the close of trading on the New York
Stock Exchange from one Valuation Day to the next.
3
FEE TABLES
THE FOLLOWING TABLES DESCRIBE THE FEES AND EXPENSES THAT YOU WILL PAY WHEN
PURCHASING, OWNING AND SURRENDERING THE CONTRACT.
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY AT THE TIME
THAT YOU PURCHASE THE CONTRACT OR SURRENDER THE CONTRACT. CHARGES FOR STATE
PREMIUM TAXES MAY ALSO BE DEDUCTED WHEN YOU MAKE CONTRIBUTIONS TO THE CONTRACT
OR UPON SURRENDER.
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases (as a percentage of Contributions) None
Contingent Deferred Sales Charge (as a percentage of amounts Surrendered) (1)
During the First Contract Year 5%
During the Second Contract Year 4%
During the Third Contract Year 3%
During the Fourth Contract Year 2%
During the Fifth Contract Year 1%
During the Sixth Contract Year and after 0%
Installation Charge (2) $1,000
------------
(1) The Contingent Deferred Sales Charge applies to amounts Surrendered during
the first five Contract Years. We do not assess a Contingent Deferred Sales
Charge on Benefit Payments or Plan Related Expenses.
(2) We may charge a one-time Installation Charge of up to $1,000 when you
purchase your Contract. This charge is for establishing your initial
Participant Accounts on our recordkeeping system. We currently waive the
Installation Charge.
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY
AND ON A DAILY BASIS DURING THE TIME THAT YOU OWN THE CONTRACT OR HAVE A
PARTICIPANT ACCOUNT UNDER THE CONTRACT, NOT INCLUDING FEES AND EXPENSES OF THE
UNDERLYING FUNDS.
ANNUAL MAINTENANCE FEE (3) $30
SEPARATE ACCOUNT ANNUAL EXPENSES (as a percentage of average daily Sub-Account Value) 0.50%
Program and Administrative Charge
Total Separate Account Annual Expenses 0.50%
------------
(3) We deduct this $30 annual maintenance fee from each Participant Account on
a quarterly basis. We deduct 25 percent of the annual fee on the last
Valuation Day of each quarter, or from the proceeds of a full Surrender of
a Participant Account. We deduct the fee proportionately from each
Investment Choice in a Participant Account.
THIS TABLE SHOWS THE MINIMUM AND MAXIMUM TOTAL ANNUAL FUND OPERATING
EXPENSES CHARGED BY THE UNDERLYING FUNDS THAT YOU MAY PAY ON A DAILY BASIS
DURING THE TIME THAT YOU OWN THE CONTRACT OR HAVE A PARTICIPANT ACCOUNT UNDER
THE CONTRACT. MORE DETAILS CONCERNING EACH FUND'S FEES AND EXPENSES IS CONTAINED
IN THE PROSPECTUS FOR EACH FUND.
MINIMUM MAXIMUM
--------------------------------------------------------------------------------------------------
TOTAL ANNUAL FUND OPERATING EXPENSES 0.81% 1.74%
(expenses that are deducted from Sub-Account
assets, including management fees, Rule 12b-1
distribution and/or service fees, and other expenses)
The LifePath(R) Retirement Portfolios are referred to as "fund of funds,"
and each diversifies its assets by investing in shares of several other
underlying Funds (as described in the underlying Fund prospectus). In general,
each Fund will indirectly bear a pro rata share of fees and expenses incurred by
the underlying Funds in which the Fund is invested.
4
THE NEXT TABLE SHOWS THE TOTAL ANNUAL FUND OPERATING EXPENSES FOR EACH
UNDERLYING FUND AS OF ITS YEAR END. ACTUAL FEES AND EXPENSES FOR THE UNDERLYING
FUNDS VARY DAILY. AS A RESULT, THE FEES AND EXPENSES FOR ANY GIVEN DAY MAY BE
GREATER OR LESS THAN THE TOTAL ANNUAL FUND OPERATING EXPENSES LISTED BELOW. MORE
DETAILS CONCERNING EACH UNDERLYING FUND'S FEES AND EXPENSES IS CONTAINED IN THE
PROSPECTUS FOR EACH FUND. THE INFORMATION PRESENTED, INCLUDING ANY EXPENSE
REIMBURSEMENT ARRANGEMENTS, IS BASED ON PUBLICLY-AVAILABLE INFORMATION AND IS
QUALIFIED IN ITS ENTIRETY BY THE THEN CURRENT PROSPECTUS FOR EACH UNDERLYING
FUND. THESE EXPENSES MAY VARY FROM YEAR TO YEAR.
ANNUAL FUND OPERATING EXPENSES
AS OF THE FUND'S YEAR END
(As a percentage of average daily net assets)
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE(12B-1) OTHER FEES AND
UNDERLYING FUND: FEES FEES EXPENSES EXPENSES
----------------------------------------------------------------------------------------------------------------
AllianceBernstein International Value
Fund -- Class A 0.71% 0.30% 0.32% N/A
American Funds The Growth Fund of
America(R) -- Class R3 0.27% 0.50% 0.20% N/A
Calvert Equity Portfolio --Class A 0.70% 0.25% 0.25% 0.02%
Goldman Sachs Mid Cap Value Fund --
Class A 0.69% 0.25% 0.22% N/A
Hotchkis and Wiley Large Cap Value
Fund -- Class A 0.75% 0.25% 0.31% N/A
Invesco Van Kampen Comstock Fund --
Class A 0.38% 0.25% 0.21% N/A
Invesco Van Kampen Equity and Income
Fund -- Class A 0.35% 0.25% 0.21% N/A
LifePath 2020 Portfolio(R) --Investor
A 0.35% 0.25% 0.51% 0.33%
LifePath 2030 Portfolio(R) --Investor
A 0.35% 0.25% 0.51% 0.33%
LifePath 2040 Portfolio(R) --Investor
A 0.35% 0.25% 0.51% 0.33%
LifePath(R) Retirement Portfolio --
Investor A 0.35% 0.25% 0.51% 0.32%
Lord Abbett Small-Cap Blend Fund --
Class A 0.74% 0.35% 0.24% N/A
PIMCO Total Return Fund --Class A 0.60% 0.25% N/A N/A
Victory Diversified Stock Fund --
Class A 0.61% N/A 0.50% N/A
THE HARTFORD MUTUAL FUNDS II, INC.
The Hartford Growth Fund --Class A 0.73% 0.25% 0.28% N/A
The Hartford Growth Opportunities Fund
-- Class A 0.71% 0.25% 0.26% N/A
The Hartford SmallCap Growth Fund --
Class A 0.81% 0.25% 0.42% N/A
THE HARTFORD MUTUAL FUNDS, INC.
The Hartford Balanced Fund --Class A 0.67% 0.25% 0.31% N/A
The Hartford Capital Appreciation Fund
-- Class A 0.65% 0.25% 0.22% N/A
The Hartford Dividend and Growth Fund
-- Class A 0.62% 0.25% 0.21% N/A
The Hartford Global Research Fund --
Class A 0.90% 0.25% 0.59% N/A
The Hartford Healthcare Fund -- Class
A 0.90% 0.25% 0.34% N/A
TOTAL CONTRACTUAL TOTAL ANNUAL
ANNUAL FEE WAIVER FUND OPERATING
OPERATING AND/OR EXPENSE EXPENSES AFTER
UNDERLYING FUND: EXPENSES REIMBURSEMENT FEE WAIVER
-------------------------------------- --------------------------------------------------------
AllianceBernstein International Value
Fund -- Class A 1.33% N/A 1.33%
American Funds The Growth Fund of
America(R) -- Class R3 0.97% N/A 0.97%
Calvert Equity Portfolio --Class A 1.22% N/A 1.22%
Goldman Sachs Mid Cap Value Fund --
Class A 1.16% N/A 1.16%
Hotchkis and Wiley Large Cap Value
Fund -- Class A 1.31% N/A 1.31%
Invesco Van Kampen Comstock Fund --
Class A 0.84% N/A 0.84%
Invesco Van Kampen Equity and Income
Fund -- Class A 0.81% N/A 0.81%
LifePath 2020 Portfolio(R) --Investor
A 1.44% 0.34% 1.10%
LifePath 2030 Portfolio(R) --Investor
A 1.44% 0.34% 1.10%
LifePath 2040 Portfolio(R) --Investor
A 1.44% 0.34% 1.10%
LifePath(R) Retirement Portfolio --
Investor A 1.43% 0.33% 1.10%
Lord Abbett Small-Cap Blend Fund --
Class A 1.33% N/A 1.33%
PIMCO Total Return Fund --Class A 0.85% N/A 0.85%
Victory Diversified Stock Fund --
Class A 1.11% N/A 1.11%
THE HARTFORD MUTUAL FUNDS II, INC.
The Hartford Growth Fund --Class A 1.26% 0.01% 1.25%
The Hartford Growth Opportunities Fund
-- Class A 1.22% 0.01% 1.21%
The Hartford SmallCap Growth Fund --
Class A 1.48% 0.08% 1.40%
THE HARTFORD MUTUAL FUNDS, INC.
The Hartford Balanced Fund --Class A 1.23% 0.05% 1.18%
The Hartford Capital Appreciation Fund
-- Class A 1.12% N/A 1.12%
The Hartford Dividend and Growth Fund
-- Class A 1.08% N/A 1.08%
The Hartford Global Research Fund --
Class A 1.74% 0.29% 1.45%
The Hartford Healthcare Fund -- Class
A 1.49% N/A 1.49%
5
DISTRIBUTION ACQUIRED
AND/OR FUND
MANAGEMENT SERVICE(12B-1) OTHER FEES AND
UNDERLYING FUND: FEES FEES EXPENSES EXPENSES
----------------------------------------------------------------------------------------------------------------
The Hartford International
Opportunities Fund -- Class A 0.73% 0.25% 0.36% N/A
The Hartford Money Market Fund --
Class A 0.45% 0.25% 0.28% N/A
The Hartford Small Company Fund --
Class A 0.80% 0.25% 0.32% N/A
TOTAL CONTRACTUAL TOTAL ANNUAL
ANNUAL FEE WAIVER FUND OPERATING
OPERATING AND/OR EXPENSE EXPENSES AFTER
UNDERLYING FUND: EXPENSES REIMBURSEMENT FEE WAIVER
-------------------------------------- --------------------------------------------------------
The Hartford International
Opportunities Fund -- Class A 1.34% 0.04% 1.30%
The Hartford Money Market Fund --
Class A 0.98% 0.13% 0.85% (1)
The Hartford Small Company Fund --
Class A 1.37% N/A 1.37%
NOTES
(1) The Investment Manager has agreed to reimburse expenses or waive fees to
the extent necessary to prevent earnings from falling below the level of
expenses. Any such expense reimbursement or waiver is voluntary and can be
changed or terminated at any time without notice. There is no guarantee
that the Fund will maintain a $1.00 net asset value per share or any
particular level of yield.
6
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
CONTRACT WITH THE COST OF INVESTING IN OTHER VARIABLE CONTRACTS. THE EXAMPLE
REFLECTS A DEDUCTION FOR ANY CONTINGENT DEFERRED SALES CHARGE, ANNUAL
MAINTENANCE FEE, MAXIMUM SEPARATE ACCOUNT ANNUAL EXPENSES AND THE HIGHEST TOTAL
ANNUAL FUND OPERATING EXPENSES OF THE UNDERLYING FUNDS. THE EXAMPLE DOES NOT
REFLECT THE DEDUCTION OF ANY APPLICABLE PREMIUM TAXES, INCOME TAXES OR TAX
PENALTIES YOU MAY BE REQUIRED TO PAY IF YOU SURRENDER YOUR CONTRACT.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. IN THE
FOLLOWING EXAMPLE TABLE, HARTFORD ASSUMES A PARTICIPANT ACCOUNT VALUE OF $10,000
TO ILLUSTRATE THE CHARGES THAT WOULD BE DEDUCTED. THE EXAMPLE ASSUMES THE ANNUAL
MAINTENANCE FEE WILL ALWAYS BE DEDUCTED IF THE CONTRACT OR PARTICIPANT ACCOUNT
IS SURRENDERED. WE CHANGE THE ANNUAL MAINTENANCE FEE FOR A $10,000 PARTICIPANT
ACCOUNT VALUE INTO A PERCENTAGE TO MORE EASILY CALCULATE THE CHARGES. THE
PERCENTAGE WE USE IS 0.30%.
THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE CONTRACT FOR THE TIME
PERIODS INDICATED. THE EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN
EACH YEAR AND ASSUMES THE HIGHEST TOTAL ANNUAL FUND OPERATING EXPENSES. ALTHOUGH
YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS, YOUR COSTS
WOULD BE:
EXAMPLE
(1) If you Surrender your Contract at the end of the applicable time
period:
1 year $1,697
3 years $2,014
5 years $2,335
10 years $3,604
(2) If you do not Surrender your Contract:
1 year $1,237
3 years $1,725
5 years $2,234
10 years $3,604
CONDENSED FINANCIAL INFORMATION
--------------------------------------------------------------------------------
When Contributions are credited to your Sub-Accounts, they are converted
into Accumulation Units by dividing the amount of your Contributions, minus any
Premium Taxes, by the Accumulation Unit value for that day. For more information
on how Accumulation Unit values are calculated see "How do I know what my
Participant Account is worth?".
AVAILABLE INFORMATION
We provide information about our financial strength in reports filed with
the SEC and state insurance departments. For example, we file annual reports
(Form 10-K), quarterly reports (Form 10-Q) and periodic reports (Form 8-K) with
the SEC. Forms 10-K and 10-Q include information such as our financial
statements, management discussion and analysis of the previous year of
operations, risk factors, and other information. Form 8-K reports are used to
communicate important developments that are not otherwise disclosed in the other
forms described above.
You may read or copy these reports at the SEC's Public Reference Room at 100
F. Street N.E., Room 1580, Washington, D.C. 20549-2001. You may also obtain
reports and other information about us by contacting us using the information
stated on the cover page of this Prospectus, visiting our website at
www.hartfordinvestor.com or visiting the SEC's website at www.sec.gov. You may
also obtain reports and other financial information about us by contacting your
state insurance department.
7
SUMMARY
WHAT ARE THE CONTRACTS?
The Contracts are group variable funding agreements. They are issued for use
as an investment vehicle for:
- certain employee retirement or welfare benefit plans,
- plans or programs of governmental entities,
- the activities of certain organizations exempt from tax under section
501(c) of the Code, or
- programs of certain institutions with assets in excess of 25 million
dollars.
WHAT TYPE OF SALES CHARGE WILL I PAY?
You don't pay a sales charge at the time Contributions are made to the
Contract. We may charge you a Contingent Deferred Sales Charge when you
partially or fully Surrender the Contract. The Contingent Deferred Sales Charge
depends on the amount you choose to Surrender and the number of Contract Years
that have been completed before the Surrender.
The percentage used to calculate the Contingent Deferred Sales Charge is
equal to:
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENT
OF AMOUNT
CONTRACT YEARS SURRENDERED
--------------------------------------------------------------------------------
During the First Contract Year 5%
During the Second Contract Year 4%
During the Third Contract Year 3%
During the Fourth Contract Year 2%
During the Fifth Contract Year 1%
During the Sixth Contract Year and after 0%
You won't be charged a Contingent Deferred Sales Charge on:
X Benefit Payments
X Plan Related Expenses
IS THERE AN INSTALLATION CHARGE?
Your Contract allows us to charge a one-time Installation Charge of up to
$1,000 at the time we establish the initial Participant Accounts for your
Contract on our recordkeeping system. We currently waive the Installation
Charge.
IS THERE AN ANNUAL MAINTENANCE FEE?
We deduct this $30 annual maintenance fee from each Participant Account on a
quarterly basis. We deduct 25 percent of the annual fee on the last Valuation
Day of each quarter, or from the proceeds of a full Surrender of a Participant
Account.
WHAT CHARGES WILL I PAY ON AN ANNUAL BASIS?
In addition to the Annual Maintenance Fee, you pay the following charges
each year:
- PROGRAM AND ADMINISTRATIVE CHARGE -- For providing administrative
services, we deduct a daily charge at an annual rate of 0.50% against
all Contract values in the Sub-Accounts.
- ANNUAL FUND OPERATING EXPENSES -- These are charges for the Funds.
See the Annual Fund Operating Expenses table for more complete
information and the Fund's prospectuses.
IS THERE A DEDUCTION FOR PREMIUM TAXES?
We currently do not deduct for the payment of any Premium Taxes levied
against us by a state or other government entity. We reserve the right to deduct
Premium Taxes imposed on us and required by a state or other government entity.
Premium Tax rates vary by state or municipality and currently ranges from 0% -
3.5%.
8
CAN I WITHDRAW MONEY FROM THE CONTRACT?
The Contract Owner can withdraw all or part of the amounts invested under
the Contract at any time. We call withdrawals from the Contract "Surrenders".
X You may have to pay a Contingent Deferred Sales Charge if the Surrender is
not a Benefit Payment or for a Plan Related Expense.
X We pay Surrenders under the available Settlement Options.
WHAT ARE THE AVAILABLE SETTLEMENT OPTIONS?
We call the available forms of payment in which you can take a Surrender
"Settlement Options". We will pay Surrenders according to the Settlement Option
that you choose. The following Settlement Options are available:
- Payment in a single sum.
- Installment payments for a designated period. The frequency of
payments and the length of the designated period are determined by
mutual agreement between you and us.
9
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance related information
concerning its Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance. The Funds available through this Separate Account are retail mutual
funds that publish performance related information in newspapers, magazines, the
internet and other media. Performance information published by a retail mutual
fund will be different than the performance information published by the
Separate Account because performance information of a retail mutual fund does
not include the expenses charged by the Separate Account.
When a Sub-Account advertises its STANDARDIZED TOTAL RETURN, it will usually
be calculated from the date of the Sub-Account's inception into the Separate
Account for one year, five years, and ten years or some other relevant periods
if the Sub-Account has not been in existence for at least ten years. Total
return is measured by comparing the value of an investment in the Sub-Account at
the beginning of the relevant period to the value of the investment at the end
of the period. Total return calculations reflect a deduction for Total Fund
Operating Expenses, any Contingent Deferred Sales Charge, Total Separate Account
Annual Expenses, and the Annual Maintenance Fee.
A Separate Account may also advertise NON-STANDARD TOTAL RETURNS THAT
PRE-DATE THE INCEPTION DATE OF THE SEPARATE ACCOUNT. These non-standardized
total returns are calculated by assuming that the Sub-Accounts have been in
existence for the same periods as the underlying Funds and by taking deductions
for charges equal to those currently assessed against the Sub-Accounts. This
figure will usually be calculated for one year, five years, and ten years or
other periods. Non-standardized total return calculations reflect a deduction
for Total Fund Operating Expenses, Total Separate Account Annual Expenses, and
do not include deduction for Contingent Deferred Sales Charges or the Annual
Maintenance Fee. This means the non-standardized total return for a Sub-Account
is higher than standardized total return for a Sub-Account. These
non-standardized returns must be accompanied by standardized total returns.
If applicable, a Sub-Account may advertise YIELD IN ADDITION TO TOTAL
RETURN. The yield will be computed in the following manner: the net investment
income per unit earned during a recent 30 day period is divided by the unit
value on the last day of the period. This figure reflects the recurring charges
on the Separate Account level including the Annual Maintenance Fee.
A money market Sub-Account may advertise YIELD AND EFFECTIVE YIELD. The
yield of the Sub-Account is based upon the income earned by the Sub-Account over
a seven-day period and then annualized, i.e. the income earned in the period is
assumed to be earned every seven days over a 52-week period and stated as a
percentage of the investment. Effective yield is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Sub-Account units and thus compounded in the course of a 52-week period. Yield
and effective yield reflect the recurring charges on the Separate Account level
including the Annual Maintenance Fee.
We may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable arrangements, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for such alternatives.
HARTFORD LIFE INSURANCE COMPANY
Hartford Life Insurance Company ("Hartford Life") is a stock life insurance
company engaged in the business of writing life insurance and annuities, both
individual and group, in every state as well as the District of Columbia. We
were originally incorporated under the laws of Massachusetts on June 5, 1902,
and subsequently redomiciled to Connecticut. Our offices are located in
Simsbury, Connecticut; however, our mailing address is P.O. Box 1583, Hartford,
CT 06144-1583. We are ultimately controlled by The Hartford Financial Services
Group, Inc., one of the largest financial service providers in the United
States.
On January 1, 2013, Hartford Life entered into a reinsurance agreement with
Massachusetts Mutual Life Insurance Company ("MassMutual") to re-insure the
obligations of Hartford Life under the Contracts and to provide administration
of the Contracts.
10
THE SEPARATE ACCOUNT
We set aside and invest assets of some of our annuity contracts, including
this Contract in the Separate Account. The Separate Account is registered as a
unit investment trust under the Investment Company Act of 1940. This
registration does not involve supervision by the SEC of the management or the
investment practices of the Separate Account or Hartford. The Separate Account
meets the definition of "separate account" under federal securities law. The
Separate Account holds only assets for variable funding agreements. The Separate
Account:
- Holds assets for the benefit of Contract Owners, and the persons
entitled to the payments described in the Contract.
- Is not subject to the liabilities arising out of any other business
Hartford may conduct. The General Account is subject to the Company's
claims-paying ability. Investors must look to the strength of the
insurance company with regard to insurance company guarantees. Our
ability to honor all guarantees under the Contract is subject to our
claims-paying capabilities and/or financial strength.
- Is not affected by the rate of return of Hartford's General Account
or by the investment performance of any of Hartford's other separate
accounts.
- May be subject to liabilities from a Sub-Account of the Separate
Account that holds assets of other contracts offered by the Separate
Account which are not described in this Prospectus.
- Is credited with income and gains, and takes losses, whether or not
realized, from the assets it holds.
WE DO NOT GUARANTEE THE INVESTMENT RESULTS OF THE SEPARATE ACCOUNT. THERE IS
NO ASSURANCE THAT THE VALUE OF YOUR PARTICIPANT ACCOUNT WILL EQUAL THE TOTAL OF
THE CONTRIBUTIONS MADE TO YOUR PARTICIPANT ACCOUNT.
Separate Account Twelve was established on September 15, 2003.
THE FUNDS
The Separate Account is divided into "Sub-Accounts." Each Sub-Account
invests in an underlying Fund. You choose the Funds that fit your investment
goals and risk tolerance. Each Fund has its own investment objective, so each
Fund is subject to different risks and expenses. For more complete information
about each Fund, including risks and expenses, call us at 1-800-528-9009 to
obtain each Funds' prospectus. Before investing, you should carefully read each
Fund's prospectus along with this Prospectus.
We do not guarantee the investment results of any of the underlying Funds.
THE FUNDS MAY NOT BE AVAILABLE IN ALL STATES OR IN ALL CONTRACTS.
THE FUNDS ARE RETAIL MUTUAL FUNDS THAT ARE ALSO AVAILABLE DIRECTLY TO THE
PUBLIC WITHOUT A SEPARATE ACCOUNT. IF YOU WERE TO PURCHASE THESE FUNDS DIRECTLY
FROM A BROKER OR MUTUAL FUND COMPANY, YOU WOULD NOT INCUR THE EXPENSES OF THE
SEPARATE ACCOUNT.
[Fund Objective Table to be filed by Amendment.]
VOTING RIGHTS: We are the legal owners of all Fund shares held in the
Separate Account and we have the right to vote at the Fund's shareholder
meetings. To the extent required by federal securities laws or regulations, we
will:
- Notify the Contract Owner of any Fund shareholders' meeting if the
shares held for the Contract may be voted;
- Send proxy materials and a form of instructions to the Contract Owner
that may be used to tell us how to vote the Fund shares held for the
Contract;
- Arrange for the handling and tallying of proxies received from
Contract Owners;
- Vote all Fund shares attributable to a Contract according to
instructions received from the Contract Owner; and
- Vote all Fund shares for which no voting instructions are received in
the same proportion as shares for which instructions have been
received.
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Voting all Fund shares for which no voting instructions are received in the
same proportion as shares for which voting instructions have been received may
result in a small number of Contract Owners determining the outcome of a
proposal subject to a shareholder vote.
If any federal securities laws or regulations, or their present
interpretation, change to permit us to vote Fund shares on our own, we may
decide to do so. Contract Owners may attend any shareholder meeting at which
shares held for their Contract may be voted.
SUBSTITUTIONS, ADDITIONS, OR DELETIONS OF FUNDS -- We may, subject to any
applicable law, make certain changes to the Funds offered under your Contract.
We may, in our sole discretion, establish new Funds. New Funds will be made
available to existing Contract Owners as we determine appropriate. We may also
close one or more Funds to additional Contributions or transfers from existing
Sub-Accounts.
We may eliminate the shares of any of the Funds from the Contract for any
reason and we may substitute shares of another registered investment company for
the shares of any Fund already purchased or to be purchased in the future by the
Separate Account. To the extent required by the Investment Company Act of 1940
(the "1940 Act"), substitutions of shares attributable to your interest in a
Fund will not be made until we have the approval of the Commission and we have
notified you of the change.
In the event of any substitution or change, we may, by appropriate
endorsement, make any changes in the Contract necessary or appropriate to
reflect the substitution or change. If we decide that it is in the best interest
of the Contract Owners, the Separate Account may be operated as a management
company under the 1940 Act or any other form permitted by law, may be
de-registered under the 1940 Act in the event such registration is no longer
required, or may be combined with one or more other Separate Accounts.
FEES AND PAYMENTS RECEIVED BY HARTFORD FROM THE FUND FAMILIES: We want you
to know that Hartford receives substantial fees and payments with respect to the
underlying Funds that are offered as Sub-Accounts to your plan through the
Contract. These types of fees and payments are sometimes called "revenue
sharing" payments. We consider these fees and payments, among a number of other
factors, when deciding to include a fund to the menu of Funds that we offer
through the Contract. All of the underlying Funds on the overall menu make
payments to Hartford or an affiliate. We receive these fees and payments under
agreements between Hartford and the principal underwriters, transfer agents,
investment advisers and/or other entities related to the Funds in amounts up to
0.75% of assets invested in a Fund. These fees and payments may include asset
based sales compensation and service fees under distribution and/or servicing
plans adopted by funds pursuant to Rule 12b-1 under the Investment Company Act
of 1940. These fees and payments may also include administrative service fees
and additional payments, expense reimbursements and other compensation. Hartford
expects to make a profit on the amount of the fees and payments that exceed
Hartford's own expenses, including our expenses of paying compensation to
broker-dealers, financial institutions and other persons for selling the
Contracts.
We also want you to understand that not all fund families pay the same
amount of fees and compensation to us and not all funds pay according to the
same formula. Because of this, the amount of the fees and payments received by
Hartford varies by fund and Hartford may receive greater or less fees and
payments depending on which variable investment options your plan selects.
For Example:
As one of its selected investment options in its Contract, the Any Company
Retirement Plan maintains an average balance of $100,000 in an investment
option investing in shares of a hypothetical mutual fund during the year.
If the fund's principal underwriter pays Hartford a Rule 12b-1 fee at a
rate of 0.50% of assets annually, and the fund's transfer agent pays
Hartford an administrative service fee at a rate of 0.25% of assets
annually, Hartford would receive $500 in 12b-1 fees and $250 in
administrative service fees, for a total of $750 for that year due to the
plan's investment in the fund.
If the plan maintained an average balance of $100,000 in an investment
option investing in a different fund during the year where that fund's
principal underwriter pays Hartford a Rule 12b-1 fee at a rate of 0.25% of
assets annually, and the fund's transfer agent pays Hartford an
administrative services fee at a rate of $12 per plan Participant Account
invested in the investment option investing in the fund, and there are 20
participants with an account balance invested in that investment option,
Hartford would receive $250 in 12b-1 fees and $240 in administrative
service fees, for a total of $490 for that year due to the plan's
investment in the fund.
You should also know that the principal underwriters of certain funds have
chosen to offer for sale, and Hartford has selected, fund share classes with
asset based sales charges and/or service fees that may or may not be higher than
other available share classes of the same fund. As a result of any higher asset
based fees and charges paid by investors
12
in such share classes, the amount of fees and payments that might otherwise need
to be paid by such fund principal underwriters or their affiliates to Hartford
would decrease.
Some of the Sub-Accounts available in the Contract invest in Funds that are
part of our own affiliated family of funds. In addition to any fees and payments
Hartford may receive with respect to those funds, one or more of our affiliates
receives compensation from the funds, including among other things a management
fee and 12b-1 fees from the funds.
For information on which underlying Funds pay Hartford such fees and at what
level, please visit our website at retire.hartfordlife.com or call
1-800-874-2502, Option 4. Written information will be provided upon request.
ENDORSEMENT FEES PAID BY HARTFORD: Hartford pays fees to the organizations
listed below in exchange for an endorsement of our Contract. As part of the
endorsement, Hartford is invited to participate in various programs, conferences
and meetings offered through these organizations in order to allow us to market
our Contract.
Hartford also pays additional fees in order to sponsor certain programs
offered through these organizations including the "Top Cop Awards" program and
an annual "Pension and Benefits Seminar" offered to members of these
organizations.
For additional information on the amount of fees and payments made by
Hartford, please call 1-800-874-2502, Option 4. Written information will be
provided upon request.
Organizations Receiving Endorsement Fee Payments from Hartford:
1. The National Association of Police Officers;
2. Florida Police Benevolent Association, Inc.;
3. Police Benevolent & Protective Association of Illinois;
4. Combined Law Enforcement Association of Texas; and
5. The American Public Garden Association.
GENERAL ACCOUNT OPTION
IMPORTANT INFORMATION YOU SHOULD KNOW: THE PORTION OF THE CONTRACT RELATING
TO THE GENERAL ACCOUNT OPTION IS NOT REGISTERED UNDER THE SECURITIES ACT OF 1933
("1933 ACT") AND THE GENERAL ACCOUNT OPTION IS NOT REGISTERED AS AN INVESTMENT
COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940 ("1940 ACT"). NEITHER THE
GENERAL ACCOUNT OPTION NOR ANY INTEREST IN THE GENERAL ACCOUNT OPTION IS SUBJECT
TO THE PROVISIONS OR RESTRICTIONS OF THE 1933 ACT OR THE 1940 ACT, AND THE STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE
REGARDING THE GENERAL ACCOUNT OPTION.
The General Account option is part of our General Account that includes our
company assets. Contributions and Contract values allocated to the General
Account are available to our general creditors.
DECLARED RATE OF INTEREST: We credit interest on Contributions made to the
General Account at a rate we declare for any period of time that we determine.
We may change the declared interest rate from time to time at our discretion.
GUARANTEED RATE OF INTEREST: We guarantee a minimum rate of interest. The
declared interest rate will not be less than the minimum guaranteed rate of
interest.
SURRENDERS AND TRANSFERS: We generally process Surrenders and transfers from
the General Account option within a reasonable period of time after we receive a
Surrender request at our Administrative Office. However, under certain
conditions, transfers from the General Account option may be limited or
deferred. Surrenders may be subject to a contingent deferred sales charge or a
market value adjustment and may be deferred.
THE GENERAL ACCOUNT IS SUBJECT TO THE COMPANY'S CLAIMS-PAYING ABILITY.
INVESTORS MUST LOOK TO THE STRENGTH OF THE INSURANCE COMPANY WITH REGARD TO
INSURANCE COMPANY GUARANTEES. OUR ABILITY TO HONOR ALL GUARANTEES UNDER THE
CONTRACT IS SUBJECT TO OUR CLAIMS-PAYING CAPABILITIES AND/OR FINANCIAL STRENGTH.
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CONTRACT CHARGES
CONTINGENT DEFERRED SALES CHARGE
The Contingent Deferred Sales Charge covers some of the expenses relating to
the sale and distribution of the Contract, including:
- the cost of preparing sales literature,
- commissions and other compensation paid to broker-dealers and their
registered representatives,and
- other promotional and distribution related activities.
If the Contingent Deferred Sales Charge is not sufficient to cover sales and
distribution expenses, we pay those expenses from our general assets, including
surplus. Surplus might include profits resulting from the Program and
Administrative Charge.
We do not deduct a sales charge at the time Contributions are made to the
Contract. We may assess a Contingent Deferred Sales Charge when you request a
full or partial Surrender. The Contingent Deferred Sales Charge is based on the
amount you choose to Surrender and the number of Contract Years that have been
completed before the Surrender. We do not assess a Contingent Deferred Sales
Charge after the fifth Contract Year.
The percentage used to calculate the Contingent Deferred Sales Charge is
equal to:
CONTINGENT DEFERRED
SALES CHARGE
AS A PERCENT OF
CONTRACT YEARS AMOUNT SURRENDERED
--------------------------------------------------------------------------------
During the First Contract Year 5%
During the Second Contract Year 4%
During the Third Contract Year 3%
During the Fourth Contract Year 2%
During the Fifth Contract Year 1%
During the Sixth Contract Year and after 0%
The following Surrenders are NOT subject to a Contingent Deferred Sales
Charge:
- BENEFIT PAYMENTS -- We do not assess a Contingent Deferred Sales
Charge on amounts that you Surrender from the Contract to pay
benefits to a Participant or a beneficiary under the terms of your
plan. We call these amounts "Benefit Payments". Amounts Surrendered
for transfer to the funding vehicle of another investment provider or
Surrendered because of the termination of your plan are not Benefit
Payments. Upon our request, you must provide documentation acceptable
to us that a Surrender is a Benefit Payment.
- PLAN RELATED EXPENSES -- We do not assess a Contingent Deferred Sales
Charge on amounts that you Surrender from the Contract to pay certain
administrative expenses or other Plan related expenses including,
fees to consultants, auditors, third party administrators and other
Plan service providers. We call these amounts "Plan Related
Expenses." Upon our request, you must provide us with reasonable
documentation that a Surrender is a Plan Related Expense.
We will allocate the deduction of the Contingent Deferred Sales Charge among
all Participant Accounts on a pro-rata basis unless the Contract Owner elects a
different allocation of the deduction for the Contingent Deferred Sales Charge.
INSTALLATION CHARGE
Your Contract allows us to charge a one-time Installation Charge of up to
$1,000 at the time we establish the initial Participant Accounts for your
Contract on our recordkeeping system. The Installation Charge is to help cover
our costs of reconciling your plan's Participant records with your investment
allocation instructions. We currently waive the Installation Charge.
ANNUAL MAINTENANCE FEE
The Annual Maintenance Fee is an annual $30 fee that we deduct from each
Participant Account on a quarterly basis. The fee compensates us for our
administrative services related to maintaining the Contract and the Participant
Accounts. We deduct 25 percent of the annual fee on the last Valuation Day of
each quarter, or from the proceeds of a
14
full Surrender of a Participant Account. We deduct the fee proportionately from
each Investment Choice in a Participant Account.
PROGRAM AND ADMINISTRATIVE CHARGE: For providing administrative services, we
deduct a daily charge at an annual rate of 0.50% against all Contract values in
the Sub-Accounts. This charge continues for the life of the Contract.
When you purchase the Contract, you choose one of the following two methods
that the Program and Administrative Charge is deducted under the Contract:
METHOD ONE: The Program and Administrative Charge is deducted daily. It is
assessed as a percentage of the net asset value of each Fund when Accumulation
Unit values are determined each day.
METHOD TWO: The Program and Administrative Charge is deducted each calendar
quarter. It is assessed as a percentage of the average daily assets of the Sub-
Accounts during the calendar quarter. The charge is deducted from Participant
Accounts by redeeming the Accumulation Units in proportion to the amount of the
charge.
We provide various administrative support services for plans. These services
include recordkeeping, statements of account, internet and automated voice
response account access, and participant educational materials. The Program and
Administrative Charge compensates us for providing administrative services under
the Contracts.
If the Program and Administrative Charge under a Contract is insufficient to
cover actual costs incurred by us, we will bear the loss. If the Program and
Administrative Charge exceeds these costs, we will keep the excess as profit. We
may use these profits, as well as any revenue sharing and Rule 12b-1 fees
received from certain Funds, for any proper corporate purpose including, among
other things, payment of sales expenses, including the fees paid to
distributors. We expect to make a profit from the Program and Administrative
Charge.
PREMIUM TAXES
We reserve the right to deduct a charge for Premium Tax imposed on us by a
state or other governmental entity. Certain states and municipalities impose a
Premium Tax. In some cases, Premium Taxes are deducted at the time purchase
payments are made; in other cases Premium Tax is assessed at the time of
Surrender. We will pay Premium Taxes at the time imposed under applicable law.
At our sole discretion, we may deduct Premium Taxes at the time we pay such
taxes to the applicable taxing authorities, or at the time the Contract is
Surrendered.
CHARGES AGAINST THE FUNDS
The Separate Account purchases shares of the Funds at net asset value. The
net asset value of the Fund reflects investment advisory fees, distribution fees
and operating expenses and administrative expenses already deducted from the
assets of the Funds. These charges are described in the Funds' prospectuses.
PLAN RELATED EXPENSES
The Contract Owner may direct us to deduct amounts from the assets under a
Contract to pay certain administrative expenses or other Plan Related Expenses
including, but not limited to, fees to consultants, auditors, counsel, Hartford
and other Plan service providers. We will deduct and pay such amounts to the
Contract Owner or as directed by the Contract Owner. We may agree to include
these amounts as an adjustment to the Program and Administrative Charge.
THE CONTRACTS
THE CONTRACTS OFFERED The Contracts are group variable funding agreements.
They are issued for use as an investment vehicle for:
- certain employee retirement or welfare benefit plans,
- plans or programs of governmental entities,
- the activities of certain organizations exempt from tax under section
501(c) of the Code, or
- programs of certain institutions with assets in excess of 25 million
dollars.
The Contracts invest in publicly available Funds through the Separate
Account. The Contracts provide no additional tax benefits and do not provide tax
deferral with respect to any earnings of the underlying Funds.
15
It is important that you notify us if you change your address. If your mail
is returned to us, we are likely to suspend future mailings until an updated
address is obtained. In addition, we may rely on a third party, including the
U.S. Postal Service, to update your current address. Failure to give us a
current address may result in payments due and payable on your Participant
Account being considered abandoned property under state law (unless preempted by
ERISA), and remitted to the applicable state.
PRICING AND CREDITING OF CONTRIBUTIONS We credit initial Contributions to a
Participant Account within two Valuation Days of our receipt of a properly
completed application or an order request and the initial Contribution at our
Administrative Office.
If the application or other information accompanying the initial
Contribution is incomplete when received, we will hold the money in a
non-interest bearing account for up to five Valuation Days while we try to
obtain complete information. If we cannot obtain the information within five
Valuation Days, we will either return the Contribution and explain why it could
not be processed or keep the Contribution if you authorize us to keep it until
the necessary information is provided.
Subsequent Contributions to a Participant Account that are received prior to
the close of the New York Stock Exchange will be invested on the same Valuation
Day. Subsequent Contributions to a Participant Account that are received on a
Non-Valuation Day or after the close of the New York Stock Exchange will be
invested on the next Valuation Day.
MAY I MAKE CHANGES IN THE AMOUNTS OF MY CONTRIBUTION?
Yes. If the Plan adopted by the Contract Owner so provides, the Contract
permits the allocation of Contributions in multiples of 1% among the
Sub-Accounts. The minimum amount that may be allocated to any Sub-Account shall
not be less than $10. Such changes must be requested in the form and manner
prescribed by us.
CAN YOU TRANSFER FROM ONE SUB-ACCOUNT TO ANOTHER?
During those phases of your Contract when transfers are permissible, you may
make transfers between Sub-Accounts according to the following policies and
procedures, as they may be amended from time to time.
WHAT IS A SUB-ACCOUNT TRANSFER?
A Sub-Account transfer is a transaction requested by you that involves
reallocating part or all of your Participant Account value among the Funds
available in your Contract. Your transfer request will be processed as of the
end of the Valuation Day that it is received in good order. Otherwise, your
request will be processed on the following Valuation Day. We will send you a
confirmation when we process your transfer. You are responsible for verifying
transfer confirmations and promptly reporting any inaccuracy or discrepancy to
us and your Registered Representative. Any oral communication should be
re-confirmed in writing.
WHAT HAPPENS WHEN YOU REQUEST A SUB-ACCOUNT TRANSFER?
Many Participants request Sub-Account transfers. Some request transfers into
(purchases) a particular Sub-Account, and others request transfers out of
(redemptions) a particular Sub-Account. In addition, some Participants allocate
Contributions to Sub-Accounts, and others request Surrenders. We combine all the
daily requests to transfer out of a Sub-Account along with all Surrenders from
that Sub-Account and determine how many shares of that Fund we would need to
sell to satisfy all Participants' "transfer-out" requests. At the same time, we
also combine all the daily requests to transfer into a particular Sub-Account or
Contributions allocated to that Sub-Account and determine how many shares of
that Fund we would need to buy to satisfy all Participants' "transfer-in"
requests.
In addition, many of the Funds that are available as investment options in
our variable annuity products are also available as investment options in
variable life insurance policies, retirement plans, funding agreements and other
products offered by us or our affiliates. Each day, investors and participants
in these other products engage in similar transfer transactions.
We take advantage of our size and available technology to combine sales of a
particular Fund for many of the variable annuities, variable life insurance
policies, retirement plans, funding agreements or other products offered by us
or our affiliates. We also combine many of the purchases of that particular
Sub-Account for many of the products we offer. We then "net" these trades by
offsetting purchases against redemptions. Netting trades has no impact on the
net asset value of the Fund shares that you purchase or sell. This means that we
sometimes reallocate shares of a Fund within our accounts rather than buy new
shares or sell shares of the Fund.
16
For example, if we combine all transfer-out (redemption) requests and
Surrenders of a stock fund Sub-Account with all other sales of that underlying
Fund from all our other products, we may have to sell $1 million dollars of that
Fund on any particular day. However, if other Participants and the owners of
other products offered by us, want to transfer-in (purchase) an amount equal to
$300,000 of that same Fund, then we would send a sell order to the Fund for
$700,000 (a $1 million sell order minus the purchase order of $300,000) rather
than making two or more transactions.
WHAT RESTRICTIONS ARE THERE ON YOUR ABILITY TO MAKE A SUB-ACCOUNT TRANSFER?
FIRST, YOU MAY MAKE ONLY ONE SUB-ACCOUNT TRANSFER REQUEST EACH DAY. We limit
each Participants to one Sub-Account transfer request each Valuation Day. We
count all Sub-Account transfer activity that occurs on any one Valuation Day as
one "Sub-Account transfer", however, you cannot transfer the same Participant
Account value more than once a Valuation Day.
For Example:
- If the only transfer you make on a day is a transfer of $10,000 from
one Sub-Account into another Sub-Account, it would count as one
Sub-Account transfer.
- If, however, on a single day you transfer $10,000 out of one
Sub-Account into five other Sub-Accounts (dividing the $10,000 among
the five other Sub-Accounts however you chose), that day's transfer
activity would count as one Sub-Account transfer.
- Likewise, if on a single day you transferred $10,000 out of one
Sub-Account into ten other Sub-Accounts (dividing the $10,000 among
the ten other Sub-Account however you chose), that day's transfer
activity would count as one Sub-Account transfer.
- Conversely, if you have $10,000 in Participant Account value
distribution among 10 different Sub-Accounts and you request to
transfer the Participant Account value in all those Sub-Accounts into
one Sub-Account, that would also count as one Sub-Account transfer.
- However, you cannot transfer the same Participant Account value more
than once in one day. That means if you have $10,000 in a money
market fund Sub-Account and you transfer all $10,000 into a stock
fund Sub-Account, on that same day you could not then transfer the
$10,000 out of the stock fund Sub-Account into another Sub-Account.
SECOND, YOU ARE ALLOWED TO SUBMIT A TOTAL OF 20 SUB-ACCOUNT TRANSFERS EACH
CALENDAR YEAR (the "Transfer Rule") by U.S. Mail, Voice Response Unit, internet
or telephone. Once you have reached the maximum number of Sub-Account transfers,
you may only submit any additional Sub-Account transfer requests and any trade
cancellation requests in writing through U.S. Mail or overnight delivery
service. In other words, Voice Response Unit, internet or telephone transfer
requests will not be honored. We may, but are not obligated to, notify you when
you are in jeopardy of approaching these limits. For example, we will send you a
letter after your 10th Sub-Account transfer to remind you about the Transfer
Rule. After your 20th transfer request, our computer system will not allow you
to do another Sub-Account transfer by telephone, Voice Response Unit or via the
internet. You will then be instructed to send your Sub-Account transfer request
by U.S. Mail or overnight delivery service.
We may aggregate a Contract Owner's Contracts or a Participant's Participant
Accounts for the purposes of enforcing these restrictions.
The Transfer Rule does not apply to Sub-Account transfers that occur
automatically as part of a Company sponsored asset allocation or Dollar Cost
Averaging program. Reallocations made based on an underlying Fund merger or
liquidation also do not count toward this transfer limit. Restrictions may vary
based on state law.
We make no assurances that the Transfer Rule is or will be effective in
detecting or preventing market timing.
THIRD, POLICIES HAVE BEEN DESIGNED TO RESTRICT EXCESSIVE SUB-ACCOUNT
TRANSFERS. You should not purchase or become a Participant under this Contract
if you want to make frequent Sub-Account transfers for any reason. In
particular, don't purchase or become a Participant under this Contract if you
plan to engage in "market timing," which includes frequent transfer activity
into and out of the same Fund, or frequent Sub-Account transfers in order to
exploit any inefficiencies in the pricing of a Fund. Even if you do not engage
in market timing, certain restrictions may be imposed on you, as discussed
below:
FUND TRADING POLICIES
Generally, you are subject to Fund trading policies, if any. We are
obligated to provide, at the Fund's request, tax identification numbers and
other shareholder identifying information contained in our records to assist
Funds in
17
identifying any pattern or frequency of Sub-Account transfers that may violate
their trading policy. In certain instances, we have agreed to serve as a Fund's
agent to help monitor compliance with that underlying Fund's trading policy.
We are obligated to follow each underlying Fund's instructions regarding
enforcement of their trading policy. Penalties for violating these policies may
include, among other things, temporarily or permanently limiting or banning
Sub-Account transfers into an underlying Fund or other funds within that fund
complex. We are not authorized to grant exceptions to an underlying Fund's
trading policy. Please refer to each underlying Fund's prospectus for more
information. Transactions that cannot be processed because of Fund trading
policies will be considered not in good order.
In certain circumstances, Fund trading policies do not apply or may be
limited. For instance:
- Certain types of financial intermediaries may not be required to
provide us with shareholder information.
- "Excepted funds" such as money market funds and any underlying Fund
that affirmatively permits short-term trading of its securities may
opt not to adopt this type of policy. This type of policy may not
apply to any financial intermediary that an underlying Fund treats as
a single investor.
- A Fund can decide to exempt categories of Contract Owners whose
contracts are subject to inconsistent trading restrictions or none at
all.
- Non-shareholder initiated purchases or redemptions may not always be
monitored. These include Sub-Account transfers that are executed: (i)
automatically pursuant to a company sponsored contractual or
systematic program such as transfers of assets as a result of "dollar
cost averaging" programs, asset allocation programs, automatic
rebalancing programs, Annuity payouts, loans, or systematic
withdrawal programs; (ii) as a result of the payment of a Death
Benefit; (iii) as a result of any deduction of charges or fees under
a Contract; or (iv) as a result of payments such as loan repayments,
scheduled contributions, scheduled withdrawals or surrenders,
retirement plan contributions.
POSSIBILITY OF UNDETECTED ABUSIVE TRADING OR MARKET TIMING. We may not be
able to detect or prevent all abusive trading activities. For instance,
- Since we net all the purchases and redemptions for a particular Fund
for this and many of our other products, transfers by any specific
market timer could be inadvertently overlooked.
- Certain forms of variable annuities and types of Funds may be
attractive to market timers. We can not provide assurances that we
will be capable of addressing possible abuses in a timely manner.
- These policies apply only to individuals and entities that own or are
Participants under this Contract. However, the Funds that make up the
Sub-Accounts of this Contract are available for use with many
different variable life insurance policies, variable annuity products
and funding agreements, and they are offered directly to certain
qualified retirement plans. Some of these products and plans may have
different or less restrictive transfer rules or no transfer
restrictions at all.
- In some cases, we are unable to count the number of Sub-Account
transfers requested by Participants or enforce the Transfer Rule
because we do not keep Participant Account records for a Contract. In
those cases, the Participant Account records and Participant
Sub-Account transfer information are kept by the Contract Owner or
its third party service provider. These Contract Owners and third
party service providers may provide us with limited information or no
information at all regarding Participant Sub-Account transfers.
HOW ARE YOU AFFECTED BY FREQUENT SUB-ACCOUNT TRANSFERS?
We are not responsible for losses or lost investment opportunities
associated with the effectuation of these policies. Frequent Sub-Account
transfers may result in the dilution of the value of the outstanding securities
issued by a Fund as a result of increased transaction costs and lost investment
opportunities typically associated with maintaining greater cash positions. This
can adversely impact Fund performance and, as a result, the performance of your
Participant Account. This may also lower the Death Benefit paid to your
Beneficiary or lower Annuity payouts for your payee as well as reduce value of
other optional benefits available under your Contract.
Separate Account investors could be prevented from purchasing Fund shares if
we reach an impasse on the execution of a Fund's trading instructions. In other
words, a Fund complex could refuse to allow new purchases of shares by all our
variable product investors if the Fund and we can not reach a mutually
acceptable agreement on how to treat an investor who, in a Fund's opinion, has
violated the Fund's trading policy.
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In some cases, we do not have the tax identification number or other
identifying information requested by a Fund in our records. In those cases, we
rely on the Contract Owner to provide the information. If the Contract Owner
does not provide the information, we may be directed by the Fund to restrict the
Contract Owner from further purchases of Fund shares. In those cases, all
Participants under a plan funded by the Contract will also be precluded from
further purchases of Fund shares.
GENERAL ACCOUNT OPTION TRANSFERS
You may make transfers out of the General Account Option to the
Sub-Accounts, subject to the transfer restrictions discussed below. All transfer
allocations must be in whole numbers (e.g., 1%). For Contracts issued or amended
on or after May 1, 1992:
- Transfers of assets presently held in the General Account option, or
which were held in the General Account option at any time during the
preceding three months, to any account that we determine is a
competing account, are prohibited.
- Similarly, transfers of assets presently held in any account during
the preceding three months, that we determine is a competing account,
to the General Account option, are prohibited.
In addition, we may limit the maximum amount transferred or Surrendered from
the General Account option under a Participant Account if the amount of any
transfer or Surrender from the General Account option, when added to the sum of
all transfers and Surrenders from the General Account during the preceding
twelve months exceeds 12% of the General Account values twelve months earlier.
These restrictions apply to all transfers from the General Account Option,
including all systematic transfers and Dollar Cost Averaging Programs.
As a result of these limitations, it may take a longer period of time (i.e.,
several years) to move Participant Account values in the General Account Option
to Sub-Accounts and therefore this may not provide an effective short term
defensive strategy.
TELEPHONE AND INTERNET TRANSFERS
Transfer instructions received by telephone on any Valuation Day before the
end of any Valuation Day will be carried out that day. Otherwise, the
instructions will be carried out at the end of the next Valuation Day.
Transfer instructions you send electronically are considered to be received
by us at the time and date stated on the electronic acknowledgement we return to
you. If the time and date indicated on the acknowledgement is before the end of
any Valuation Day, the instructions will be carried out that Valuation Day.
Otherwise, the instructions will be carried out at the end of the next Valuation
Day. If you do not receive an electronic acknowledgement, you should contact us
as soon as possible.
We will send you a confirmation when we process your transfer. You are
responsible for verifying transfer confirmations and promptly advising us of any
errors within 30 days of receiving the confirmation.
Telephone or internet transfer requests may be cancelled via the internet or
by calling us before the end of the Valuation Day you made the transfer request.
We, our agents or our affiliates are NOT responsible for losses resulting
from telephone or electronic requests that we believe are genuine. We will use
reasonable procedures to confirm that instructions received by telephone or
through our website are genuine, including a requirement that Contract Owners
and Participants provide certain identifying information, including a personal
identification number. We record all telephone transfer instructions. We may
suspend, modify, or terminate telephone or electronic transfer privileges at any
time.
HOW DO I KNOW WHAT A PARTICIPANT ACCOUNT IS WORTH?
The Participant Account value reflects the sum of the amounts under the
Participant Account allocated to the General Account option and the
Sub-Accounts.
There are two things that affect the Sub-Account value: (1) the number of
Accumulation Units and (2) the Accumulation Unit value. The Sub-Account value is
determined by multiplying the number of Accumulation Units by the Accumulation
Unit value. Therefore, on any Valuation Day the portion of a Participant Account
allocated to the Sub-Accounts will reflect the investment performance of the
Sub-Accounts and will fluctuate with the performance of the underlying Funds.
19
Contributions made or Contract values allocated to a Sub-Account are
converted into Accumulation Units by dividing the amount of the Contribution or
allocation, minus any Premium Taxes, by the Accumulation Unit value for that
Valuation Day. The more Contributions or Contract values allocated to the
Sub-Accounts under a Participant Account, the more Accumulation Units will be
reflected under the Participant Account. The number of Accumulation Units in a
Sub-Account will be decreased under a Participant Account by Surrenders or
transfers of money out of a Sub-Account.
To determine the current Accumulation Unit value, we take the prior
Valuation Day's Accumulation Unit value and multiply it by the Net Investment
Factor for the current Valuation Day.
The Net Investment Factor is used to measure the investment performance of a
Sub-Account from one Valuation Day to the next. The Contract Owner chooses one
of the following two methods to calculate the Net Investment Factor at the time
the Contract Owner purchases the Contract. The value of the Contract will be the
same, regardless of the method chosen.
METHOD ONE
The Net Investment Factor for each Sub-Account equals:
- the net asset value per share plus applicable distributions per share
of the corresponding Fund at the end of the current Valuation Day;
divided by
- the net asset value per share of the corresponding Fund at the end of
the prior Valuation Day; multiplied by
- the daily expense factor for the program and administrative charge
and any other applicable charges, adjusted for the number of days in
the period.
METHOD TWO (NOT AVAILABLE TO CONTRACTS ISSUED IN NEW YORK)
The Net Investment Factor for each Sub-Account equals:
- the net asset value per share of the corresponding Fund at the end of
the current Valuation Day; divided by
- the net asset value per share of the corresponding Fund at the end of
the prior Valuation Day.
Under Method Two, the value of any applicable Fund distributions per share
creates additional Accumulation Units. We deduct the Program and Administrative
Charge from Participant Accounts each calendar quarter by redeeming Accumulation
Units in proportion to the amount of the charge.
We will send Participants a statement for each calendar quarter, that tells
how many Accumulation Units they have, their value and their total Participant
Account value. Participants can also call 1-800-528-9009 to obtain their
Participant Account value or, where available, may access their account
information through our website at retire.hartfordlife.com.
HOW ARE THE UNDERLYING FUND SHARES VALUED?
The shares of the Fund are valued at net asset value on a daily basis. A
complete description of the valuation method used in valuing Fund shares may be
found in the underlying Funds' prospectus.
SURRENDERS
FULL SURRENDERS
If you request a full Surrender of your Contract, we will pay you the
Surrender Value. The Surrender Value is the Contract value minus any applicable
Premium Taxes, Annual Maintenance Fees, and Contingent Deferred Sales Charges.
The Surrender Value may be more or less than the amount of the Contributions
made to the Contract.
PARTIAL SURRENDERS
You may request a partial Surrender of Contract values at any time before
you terminate your Contract. We will deduct any applicable Annual Maintenance
Fee from Participant Accounts and we will deduct any applicable Contingent
Deferred Sales Charges. You can ask us to deduct the Contingent Deferred Sales
Charge from the amount you are Surrendering or from the remaining Contract
value. If we deduct the Contingent Deferred Sales Charge from your remaining
Contract value, that amount will also be subject to a Contingent Deferred Sales
Charge.
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SETTLEMENT OPTIONS
We call the available forms of payment in which you can take a Surrender
"Settlement Options". We will pay Surrenders according to the Settlement Option
that you choose. The following Settlement Options are available:
- Payment in a single sum.
- Installment payments for a designated period. The frequency of
payments and the length of the designated period are determined by
mutual agreement between you and us.
HOW DO I REQUEST A SURRENDER?
The Contract Owner or its designee may submit requests for Surrenders.
Requests for full Surrenders must be in writing. Requests for partial Surrenders
must be in writing or by electronic file in a format agreed to by us.
We pay Surrenders of amounts in the Sub-Accounts within seven days of
receiving your request with complete instructions. However, we may postpone
payment of Surrenders invested in the Sub-Accounts whenever (a) the New York
Stock Exchange is closed, (b) trading on the New York Stock Exchange is
restricted by the SEC, (c) the SEC permits and orders postponement or (d) the
SEC determines that an emergency exists to restrict valuation.
We pay the portion of your Surrender Value invested in the General Account
option according to the termination provisions in your Contract.
Partial Surrenders from the General Account option may be subject to certain
restrictions described in your Contract.
FEDERAL TAX CONSIDERATIONS
WHAT ARE SOME OF THE FEDERAL TAX CONSEQUENCES THAT AFFECT THESE CONTRACTS?
A. GENERAL
Since the federal tax law is complex, the tax consequences of purchasing
this contract will vary depending on your situation. You may need tax or legal
advice to help you determine whether purchasing this contract is right for you.
Our general discussion of the tax treatment of this contract is based on our
understanding of federal income tax laws as they are currently interpreted and
may apply to this contract. A detailed description of all federal income tax
consequences regarding the purchase of this contract cannot be made in the
prospectus. We also do not discuss state, municipal or other tax laws that may
apply to this contract. Nor do we discuss the tax treatment of distributions
from or benefits paid by the plans and organizations that may invest in this
contract. For detailed tax information, a prospective purchaser should consult
with a qualified tax adviser familiar with its situation.
B. HARTFORD AND THE SEPARATE ACCOUNT
The Separate Account is taxed as part of Hartford, which is taxed as a life
insurance company under Subchapter L of Chapter 1 of the Code. The Sub-Accounts
among which the Contract Owner may allocate its Contract Contributions are
retail mutual funds that also are directly available to the public without a
Separate Account. The Internal Revenue Service has ruled that, for federal
income tax purposes, a variable contract owner will be treated as the owner of
the mutual funds shares when the mutual funds used for sub-accounts for the
variable contract are publicly available. See, e.g., Rev. Rul. 2003-91, 2003-33
I.R.B. 347. As a result, even though investment income and any realized capital
gains on the assets held in the Separate Account may be reinvested
automatically, such investment income and capital gain income may be taxable
directly to the Contract Owner. A prospective purchaser should consult with a
qualified tax adviser familiar with its situation.
C. CONTRACT PURCHASES BY FOREIGN ENTITIES
Purchasers that are not U.S. residents or entities engaged in a trade or
business in the United States generally will be subject to U.S. federal income
tax and withholding on U.S. source taxable distributions at a 30% rate, unless a
lower treaty rate applies and any required tax forms are submitted to Hartford.
In addition, purchasers may be subject to applicable U.S. state and/or municipal
taxes, and taxes that may be imposed by the purchaser's country of citizenship
or residence. Prospective purchasers are advised to consult with a qualified tax
adviser regarding U.S., state, and foreign taxation with respect to a contract
purchase.
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MORE INFORMATION
CAN A CONTRACT BE MODIFIED?
Subject to any federal and state regulatory restrictions, we may modify the
Contracts at any time by written agreement between the Contract Owner and us.
On or after the fifth anniversary of any Contract we may change, from time
to time, any or all of the terms of the Contracts by giving 90 days advance
written notice to the Contract Owner, except that the minimum guaranteed
interest rate and the contingent deferred sales charges which is applicable at
the effective date of a Contract, will continue to be applicable.
We may modify the Contract at any time if such modification: (i) is
necessary to make the Contract or the Separate Account comply with any law or
regulation issued by a governmental agency to which we are subject; or (ii) is
necessary to assure continued qualification of the Contract under federal or
state laws relating to the Contracts; or (iii) is necessary to reflect a change
in the operation of the Separate Account or the Sub-Account(s); or (iv) provides
additional Separate Account options; or (v) withdraws Separate Account options.
In the event of any such modification we will provide notice to the Contract
Owner. Hartford may also make appropriate endorsement in the Contract to reflect
such modification.
CAN HARTFORD WAIVE ANY RIGHTS UNDER A CONTRACT?
We may, at our sole discretion, elect not to exercise a right or reservation
specified in this Contract. If we elect not to exercise a right or reservation,
we are not waiving it. We may decide to exercise a right or a reservation that
we previously did not exercise.
HOW CONTRACTS ARE SOLD -- Effective January 1, 2013, we have entered into a
distribution agreement with MML Distributors, LLC ("MMLD") under which MMLD
serves as the principal underwriter for the Contracts. MMLD is a subsidiary of
Massachusetts Mutual Life Insurance Company ("MassMutual"), the administrator of
the Contracts. MMLD is registered with the Securities and Exchange Commission
under the 1934 Act as a broker-dealer and is a member of the Financial Industry
Regulatory Authority, Inc. ("FINRA"). The principal business address of MMLD is
1295 State Street, Springfield, MA 01111-0001.
MMLD has entered into selling agreements with affiliated and unaffiliated
broker-dealers, and financial institutions ("Financial Intermediaries") for the
sale of the Contracts. The Contracts are sold by individuals who have been
appointed by us as insurance agents and who are registered representatives of
Financial Intermediaries ("Registered Representatives").
We list below types of arrangements that help to incentivize sales people to
sell our suite of variable annuities. Not all arrangements necessarily affect
each variable annuity. These types of arrangements could be viewed as creating
conflicts of interest.
Financial Intermediaries receive commissions (described below under
"Commissions"). Certain selected Financial Intermediaries also receive
additional compensation (described below under "Additional Payments"). All or a
portion of the payments made to Financial Intermediaries may be passed on to
Registered Representatives according to a Financial Intermediaries' internal
compensation practices.
Affiliated broker-dealers also employ individuals called "wholesalers" in
the sales process. Wholesalers typically receive commissions based on the type
of Contract or optional benefits sold. Commissions are based on a specified
amount of Premium Payments or Contract Value.
COMMISSIONS
Up front commissions paid to Financial Intermediaries generally range from
1% to up to 7% of each Contribution you pay for your Contract. Trail commissions
(fees paid for customers that maintain their Contracts generally for more than 1
year) range up to 1.20% of your Contract Value. MMLD pays different commissions
based on the Contract variation that you buy.
Commission arrangements vary from one Financial Intermediary to another. We
and MMLD are not involved in determining your Registered Representative's
compensation. Under certain circumstances, your Registered Representative may be
required to return all or a portion of the commissions paid.
22
Check with your Registered Representative to verify whether your account is
a brokerage or an advisory account. Your interests may differ from ours and your
Registered Representative (or the Financial Intermediary with which they are
associated). Please ask questions to make sure you understand your rights and
any potential conflicts of interest. If you are an advisory client, your
Registered Representative (or the Financial Intermediary with which they are
associated) can be paid both by you and MMLD and its affiliates based on what
you buy. Therefore, profits, and your Registered Representative's (or their
Financial Intermediary's) compensation, may vary by product and over time.
Contact an appropriate person at your Financial Intermediary with whom you can
discuss these differences.
ADDITIONAL PAYMENTS
Subject to FINRA and Financial Intermediary rules, we and our affiliates
also make additional payments to Financial Intermediaries (who may or may not be
affiliated with us) to encourage the sale of this Contract and other contracts
that we issue to retirement programs that we or our affiliates offer
("Additional Payments"). Additional Payments are generally based on average net
assets (or aged assets) of the contracts or programs attributable to a
particular Financial Intermediary, on sales of the contracts or programs
attributable to a particular Financial Intermediary, and/or sales expenses.
Additional Payments could create an incentive for your Registered
Representative, and the Financial Intermediary with which they are associated,
to recommend products that pay them more than others.
Additional Payments may be used for various purposes, and may take various
forms, such as:
- Payments for access to Registered Representatives and/or Financial
Intermediaries, such as through one-on-one wholesaler visits or
attendance at national sales meetings or similar events.
- Payments for inclusion of our products on a Financial Intermediary's
"preferred list"; participation in, or visibility at, national and
regional conferences; and/or articles in Financial Intermediary
publications highlighting our products and services.
- Payments for various marketing expenses such as joint marketing
campaigns and/or Financial Intermediary event
advertising/participation; sponsorship of Financial Intermediary
sales contests and/or promotions in which participants (including
Registered Representatives) receive prizes such as travel awards,
merchandise and recognition; and expenses of generating clients.
- Payment and support to underlying Fund companies including Fund
related wholesaler support, training and marketing activities for
certain Funds, and providing sales activity reports.
- Sales support through such things as providing hardware and software,
operational and systems integration, links to our website from a
Financial Intermediary's websites; shareholder services (including
sub-accounting) sponsorship of Financial Intermediary due diligence
meetings; and/or expense allowances and reimbursements.
- "Due diligence" payments for a Financial Intermediary's examination
of a product; payments for educational training, sales or training
seminars, conferences and programs, sales and service desk training,
and/or client or prospect seminar sponsorships.
- Occasional meals and entertainment, tickets to sporting events and
other gifts.
Prior to January 1, 2013, we and our affiliates had contractual arrangements
to make Additional Payments to the following Financial Intermediaries for the
Contracts and other group annuity contracts and funding agreements we issue in
connection with retirement plans, as well as other group retirement programs:
Ameriprise Financial Services, Inc., Edward D. Jones & Co., L.P., LPL
Financial LLC, Merrill Lynch Pierce Fenner & Smith, Morgan Stanley & Co., Inc.
(various divisions and affiliates), Woodbury Financial Services, Inc. (an
affiliate of ours).
Inclusion on this list does not imply that these arrangements necessarily
constitute "special cash compensation" as defined by FINRA Conduct Rule
2830(l)(4). We will endeavor to update this listing annually and interim
arrangements may not be reflected. We assume no duty to notify any investor
whether their Financial Intermediary is or should be included in any such
listing.
For the fiscal year ended December 31, 2011, Additional Payments for the
Contracts and other group annuity contracts and funding agreements we issue in
connection with retirement plans, as well as other group retirement programs
that we or our affiliates offer, did not in the aggregate exceed approximately
$3.0 million.
23
Financial Intermediaries that received Additional Payments in 2011, but do
not have an ongoing contract for Additional Payments, are listed under General
Information.
WHO IS THE CUSTODIAN OF THE SEPARATE ACCOUNT'S ASSETS?
Hartford is the custodian of the Separate Account's assets.
ARE THERE ANY MATERIAL LEGAL PROCEEDINGS AFFECTING THE SEPARATE ACCOUNT?
There continues to be significant federal and state regulatory activity
relating to financial services companies. Like other insurance companies, we are
involved in lawsuits, arbitrations, and regulatory/legal proceedings. Certain of
the lawsuits and legal actions the Company is involved in assert claims for
substantial amounts. While it is not possible to predict with certainty the
ultimate outcome of any pending or future case, legal proceeding or regulatory
action, we do not expect the ultimate result of any of these actions to result
in a material adverse effect on the Company or its Separate Accounts.
Nonetheless, given the large or indeterminate amounts sought in certain of these
actions, and the inherent unpredictability of litigation, an adverse outcome in
certain matters could, from time to time, have a material adverse effect on the
Company's results of operations or cash flows in particular quarterly or annual
periods.
HOW MAY I GET ADDITIONAL INFORMATION?
Inquiries will be answered by calling 1-800-528-9009 or your sales
representative or by writing to:
Hartford Life Insurance Company
P.O. Box 1583
Hartford, CT 06144-1583
You can also send inquiries to us electronically via the internet through
our website at retire.hartfordlife.com.
GENERAL INFORMATION
SAFEKEEPING OF ASSETS
Hartford holds title to the assets of the Separate Account. The assets are
kept physically segregated and are held separate and apart from Hartford's
general corporate assets. Records are maintained of all purchases and
redemptions of the underlying fund shares held in each of the Sub-Accounts.
EXPERTS
[To be filed by Amendment]
NON-PARTICIPATING
The Contract is non-participating and we pay no dividends.
PRINCIPAL UNDERWRITER
Effective January 1, 2013, we have entered into a distribution agreement
with MML Distributors, LLC ("MMLD") under which MMLD serves as Principal
Underwriter for the Contracts, which are offered on a continuous basis. MMLD is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the Financial
Industry Regulatory Authority, Inc. ("FINRA"). MMLD is an affiliate of
Massachusetts Mutual Life Insurance Company ("MassMutual"), the administrator of
the Contracts. The principal business address of MMLD is 1295 State Street,
Springfield, MA 01111-0001.
Under a reinsurance agreement dated January 1, 2013 between us and
MassMutual, we are obligated to pay MassMutual amounts we receive from Hartford
Securities Distribution Company, Inc. ("HSD") related to the Contracts. MMLD
may, by written notice to us, require that we pay MMLD, as underwriting
commissions for its services, all or any part of the amounts we receive from
HSD. Currently we do not pay MMLD underwriting commissions for the Contracts
offered through the Separate Account. For 2012, 2011 and 2010, the aggregate
dollar amount of underwriting commissions paid to HSD in its role as Principal
Underwriter was $0.
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ADDITIONAL PAYMENTS
As stated in this Prospectus, effective January 1, 2013, MMLD (or its
affiliates) pay Additional Payments to Financial Intermediaries. As of December
31, 2012, Hartford Life (or its affiliates) paid Additional Payments to the
Financial Intermediaries listed in the Prospectus pursuant to contractual
arrangements to make Additional Payments. In addition, listed below are all
Financial Intermediaries that received Additional Payments from Hartford Life
(or its affiliates) in 2012 in excess of $100 of items such as sponsorship of
meetings, education seminars, and travel and entertainment, whether or not an
ongoing contractual relationship existed.
ABNB Federal Credit Union, Access Investments, Inc., Addison Avenue Federal
C. U., Aegis Investments, Inc., AFA Financial Group, LLC, AIM Distributors,
Inc., Allen & Company of Florida, Inc., American Century Brokerage, American
Classic Securities, American Funds & Trust, Inc., American Heritage FCU,
American Portfolios Financial Services, Ameritas Investment Corp., Amtrust Bank,
Anchor Bank, Anderson & Strudwick, Inc., Arvest Asset Management, Ausdal
Financial Partners Inc., AXA Advisors, LLC, B.C. Ziegler and Company,
Bancorpsouth Bank, BancWest Investment Services, Inc., Bank of the West, Bank
Securities Association, Bankers & Investors Co., Baxter Credit Union, BB&T
Investment Services, Inc., BBVA Compass Investment Solutions, Beacon Federal
Credit Union, Bernard Herold & Co., Inc., Bethpage Federal Credit Union, BOSC,
Inc., BPU Investment Management, Inc., Brewer Financial Services, LLC, Broker
Dealer Financial Svcs Corp., Bruce A. Lefavi Securities, Inc., CJM Planning
Corp., Cadaret, Grant & Co., Inc., Cambridge Investment Research, Inc.,
Cambridge Legacy Sec., LLC, Cantella & Co., Inc., Capital Analysts, Inc.,
Capital Financial Services Inc., Capital Guardian, LLC, Capital Investment
Group, Inc., Capitol Securities Management, Inc., Cary Street Partners, LLC, CCF
Investments, Inc., CCO Investment Services Corp., Centaurus Financial, Inc.,
Center Street Securities, Inc., Century Securities Assocs., Inc., CFD
Investments, Inc., Chapin Davis, Charles Schwab & Company, Inc, Chase
Investments Services, Corp., Citigroup Global Markets, Inc., City Bank, City
Securities Corporation, Comerica Bank, Comerica Securities, Commerce Bank, N.A.,
Commerce Brokerage Services, Inc., Commonwealth Central C.U., Commonwealth
Financial Network, Compass Bank, Conservative Financial Services, Inc.,
Consolidated Federal C.U., Coordinated Capital Securities, Inc., Cresap Inc.,
Crews & Associates, Inc., Crown Capital Securities, LLP, Cuna Brokerage
Services, Inc., Cuso Financial Services, LLP., Cutter & Company, Inc., D.A.
Davidson & Company, David A. Noyes & Company, DeWaay Financial Network LLC,
Duncan-Williams, Inc., Edward Jones, Elevations Credit Union, Emerson Equity,
LLC, Empire Financial Group, Inc., EPlanning Securities, Inc., Equity Services,
Inc., ESB Financial, Essex Financial Services, Inc., Essex National Securities,
Inc., Feltl & Company, Fidelity Investment Inst. Services, Fifth Third Bank,
Fifth Third Securities, Financial Advisors of America, Financial Network
Investment Corp., Financial Telesis, Inc., Fintegra LLC, First Allied
Securities, First Banking Center, First Citizens Bank, First Citizens Bank &
Trust Co., First Citizens Investor Services, First Citizens Securities, First
Commonwealth FCU, First Financial Equity Corp., First Heartland Capital, Inc.,
First Interstate Bank, First Midwest Securities, First National Bank of Omaha,
First Niagara Bank, First Tennessee Bank, First Tennessee Brokerage, Inc., First
Western Securities, Inc., FNIC F.I.D. Div., Folger Nolan Fleming Douglas,
Foothill Securities, Inc., Foresight Financial Group, Inc., Foresters Equity
Services, Inc., Frost Brokerage Services Inc., Frost National Bank, FSC
Securities Corporation, Fulton Bank, Geneos Wealth Management, Inc., Gilford
Securities, Inc., Girard Securities, Inc., GWN Securities, Inc., H&R Block
Financial Advisors, Inc., H. Beck, Inc., H. D. Vest Investment Services,
Hamilton Cavanaugh & Associates, Inc., Harbour Investments, Inc., Harger and
Company, Inc., Harris Investor Services, Inc., Harris Investors, Harvest Capital
LLC, Heim Young & Associates, Inc., Hightower Securities LLC, Home S&L Company
of Youngstown, Hornor, Townsend & Kent, Inc., HSBC Bank USA, National
Association, HSBC Securities (USA) Inc., Huntington Valley Bank, Huntleigh
Securities Corp., IJL Financial LLC, Independent Financial Group, LLC, Infinex
Investment, Inc., ING Financial Advisors, LLC, ING Financial Partners,
InterSecurities Inc., INVEST Financial Corporation, INVEST / Capital City Bank,
INVEST / United Community Bank, Investacorp, Inc., Investment Center, Inc.,
Investment Centers of America, Investment Planners, Inc., Investment
Professionals, Inc., Investors Capital Corp., Investors Security Co., Inc.,
J.J.B. Hilliard, W.L. Lyons LLC, J. P. Turner & Company, LLC, J.W. Cole
Financial, Inc., Janney Montgomery Scott, Inc., JHS Capital Advisors, Inc., Kern
Schools Federal Credit Union, KeyBank, NA, Key Investment Services, LLC.,
Kinecta Credit Union, KMS Financial Services, Inc., Kovack Securities, Inc., KW
Securities Corporation, L.F. Financial, LLC, L.O. Thomas & Company, LaSalle
Street Securities, Inc., Legacy Asset Securities, Inc., Legend Equities
Corporation, Leigh Baldwin & Co., LLC, Leonard & Company, Lifemark Securities
Corp., Lincoln Financial Advisors Corp., Lincoln Financial Securities, Lincoln
Investment Planning, Inc., Linsco / Private Ledger / Bank Div., Lord Abbett &
Co., LPL Financial Corporation, LPL Financial Services, M Griffith Investment
Services, Inc., M & T Bank, M & T Securities, Inc., MB Financial Bank, NA,
MetLife Securities, Inc., MFS Fund Distributors, Inc., MidAmerica Financial
Services, Inc., Midwestern Securities Trading Co. LLC, MML Investor Services,
Inc., Money Concepts Capital Corp., Moors & Cabot, Inc., Morgan Keegan & Co.,
Inc., Morgan Keegan FID Division, Morgan Stanley Smith Barney, MTL Equity
Products, Inc., Multi-Financial Securities Corp., Multiple Financial Services,
Inc., National Financial Services Corp., National Planning Corporation, National
Securities Corp., Nationwide
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Planning Associates, Inc., Nationwide Securities LLC, Navy Federal Brokerage
Services, NBC Financial Services, NBC Securities, Inc., Neidiger, Tucker,
Bruner, Inc., New England Securities Corp., Newbridge Securities Corp., Nexity
Financial Services, Inc., Next Financial Group, Inc., NFP Securities, Inc.,
North Ridge Securities Corp., Northwestern Mutual Inv. Services, O.N. Equity
Sales Co., OFG Financial Services, Inc., Ohio National Equities, Inc.,
OneAmerica Securities, Inc., Oppenheimer & Co., Inc., Park Avenue Securities,
LLC, Paulson Investment Company Inc., Peak Investments, Peoples Bank, Peoples
Securities, Inc., Peoples United Bank, Pershing, Pinnacle Bank, PlanMember
Securities Corp., Premier America Credit Union, Prime Capital Services, Inc.,
Prime Solutions Securities, Inc., PrimeVest Financial Services Inc., Princor
Financial Service Corp., ProEquities, Inc., Professional Asset Management, Inc.,
Prospera Financial Services, Purshe Kaplan Sterling Investment, Putnam
Investments, QA3 Financial Corp., Questar Capital Corp., Raymond James Financial
Services, Inc., Raymond James & Associates Inc., Raymond James FID Division, RBC
Bank, RBC Capital Markets Corp., RBC Dain FID Division, RBS Citizens, NA, Robert
W. Baird & Co., Inc., Rogan & Associates, Inc., Rolan Francis & Co., Inc., Royal
Alliance Associates, Inc., Sagepoint Financial, Inc., Sammons Securities Company
LLC, Saxony Securities, Inc., Scott & Stringfellow, Inc., Securian Financial
Services, Securities America, Inc., Securities Service Network, Inc., Security
Service F.C.U., Sigma Financial Corporation, Signator Investors Inc., Signature
Bank, Signature Financial Group, Inc., Signature Securities Group, SII
Investments, Smith Barney, Smith Barney Bank Advisor, Smith, Brown & Groover,
Inc., Sorrento Pacific Financial LLC, Southwest Securities, Inc., Sovereign
Bank, Spokane Teachers C.U. Stephens, Inc., Sterne Agee & Leach, Inc., Stifel,
Nicolaus & Co., Inc., Summit Bank, Summit Brokerage Services Inc., SunMark
Community Bank, Sunset Financial Services, Inc., SunTrust Investment Services,
Inc., Susquehanna Bank, SWBC Investment Company, Symetra Investment Services,
Inc., Synergy Investment Group, Synovus Securities, TD Ameritrade, Inc., TFS
Securities, Inc., The Huntington Investment Co., The Leaders Group, Inc.,
Thurston, Springer, Miller, Herd, Tower Bank & Trust Company, Tower Square
Securities, Inc., Transamerica Financial Advisor, Triad Advisors, Inc.,
Trustmont Financial Group, Inc., UBS Financial Services, Inc., UCB Investment
Services, Inc., UMB Financial Services, Inc., Union Bank & Trust, Union Bank of
California, NA, UnionBanc Investment Services, United Bank, United Brokerage
Services, Inc., United Planners Financial Services of America, US Bancorp FID,
US Bancorp Investments, US Bank, NA, UVest Financial Services Group, Inc., VALIC
Financial Advisors, Inc., Valmark Securities, VanDerbilt Securities, LLC, VSR
Financial Services, Inc., Wachovia ISG Platform, Wall Street Financial Group,
Walnut Street Securities, Inc., Webster Bank, N.A., Wedbush Morgan Securities,
Inc., Wells Fargo Adv. Financial Network LLC, Wells Fargo Advisors, LLC, Wells
Fargo Advisors, LLC ISG, Wells Fargo Ins. Services Inv. Adv., Wells Fargo
Investments, WesBanco Securities, Inc., Wescom Financial Services, Western
International Securities, WFG Investments, Inc., Williams Financial Group, Inc.,
Woodbury Financial Services, Inc., Woodstock Financial Group, Inc., World Equity
Group, Inc., WRP Investments, Inc., and Wunderlich Securities Inc.
PERFORMANCE RELATED INFORMATION
The Separate Account may advertise certain performance-related information
concerning the Sub-Accounts. Performance information about a Sub-Account is
based on the Sub-Account's past performance only and is no indication of future
performance.
TOTAL RETURN FOR ALL SUB-ACCOUNTS
When a Sub-Account advertises its standardized total return, it will usually
be calculated from the date of the inception of the Sub-Account for one, five
and ten year periods or some other relevant periods if the Sub-Account has not
been in existence for at least ten years. Total return is measured by comparing
the value of an investment in the Sub-Account at the beginning of the relevant
period to the value of the investment at the end of the period. To calculate
standardized total return, Hartford uses a hypothetical initial premium payment
of $1,000.00 and deducts for the Program and Administrative Charge, the highest
possible Contingent Deferred Sales Charge and the Annual Maintenance Fee.
The formula Hartford uses to calculate standardized total return is P(1+T)
TO THE POWER OF n = ERV. In this calculation, "P" represents a hypothetical
initial premium payment of $1,000.00, "T" represents the average annual total
return, "n" represents the number of years and "ERV" represents the redeemable
value at the end of the period.
In addition to the standardized total return, the Sub-Account may advertise
a non-standardized total return. These figures will usually be calculated from
the date of inception of the underlying fund for one, five and ten year periods
or other relevant periods. Non-standardized total return is measured in the same
manner as the standardized total return described above, except that the
Contingent Deferred Sales Charge and the Annual Maintenance Fee are
26
not deducted. Therefore, non-standardized total return for a Sub-Account is
higher than standardized total return for a Sub-Account.
YIELD FOR SUB-ACCOUNTS
If applicable, the Sub-Accounts may advertise yield in addition to total
return. At any time in the future, yields may be higher or lower than past
yields and past performance is no indication of future performance.
The standardized yield will be computed for periods beginning with the
inception of the Sub-Account in the following manner. The net investment income
per Accumulation Unit earned during a one-month period is divided by the
Accumulation Unit value on the last day of the period. This figure reflects
deductions for the Program and Administrative Charge and the Annual Maintenance
Fee.
The formula Hartford uses to calculate yield is YIELD = 2[(a - b/cd +1)6 -
1]. In this calculation, "a" represents the net investment income earned during
the period by the underlying fund, "b" represents the expenses accrued for the
period, "c" represents the average daily number of Accumulation Units
outstanding during the period and "d" represents the maximum offering price per
Accumulation Unit on the last day of the period.
MONEY MARKET SUB-ACCOUNTS
At any time in the future, current and effective yields may be higher or
lower than past yields and past performance is no indication of future
performance.
Current yield of a money market fund Sub-Account is calculated for a
seven-day period or the "base period" without taking into consideration any
realized or unrealized gains or losses on shares of the underlying fund. The
first step in determining yield is to compute the base period return. Hartford
takes a hypothetical account with a balance of one Accumulation Unit of the
Sub-Account and calculates the net change in its value from the beginning of the
base period to the end of the base period. Hartford then subtracts an amount
equal to the total deductions for the Contract and then divides that number by
the value of the account at the beginning of the base period. The result is the
base period return or "BPR". Once the base period return is calculated, Hartford
then multiplies it by 365/7 to compute the current yield. Current yield is
calculated to the nearest hundredth of one percent.
The formula for this calculation is YIELD = BPR x (365/7), where BPR = (A -
B)/C. "A" is equal to the net change in value of a hypothetical account with a
balance of one Accumulation Unit of the Sub-Account from the beginning of the
base period to the end of the base period. "B" is equal to the amount that
Hartford deducts for the program and administrative charge, and the Annual
Maintenance Fee. "C" represents the value of the Sub-Account at the beginning of
the base period.
Effective yield is also calculated using the base period return. The
effective yield is calculated by adding 1 to the base period return and raising
that result to a power equal to 365 divided by 7 and subtracting 1 from the
result. The calculation Hartford uses is:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) TO THE POWER OF 365/7] - 1.
ADDITIONAL MATERIALS
We may provide information on various topics to Contract Owners and
prospective Contract Owners in advertising, sales literature or other materials.
These topics may include the relationship between sectors of the economy and the
economy as a whole and its effect on various securities markets, investment
strategies and techniques (such as value investing, dollar cost averaging and
asset allocation), the advantages and disadvantages of investing in tax-deferred
and taxable arrangements, customer profiles and hypothetical purchase scenarios,
financial management and tax and retirement planning, and other investment
alternatives, including comparisons between the Contracts and the
characteristics of and market for any alternatives.
PERFORMANCE COMPARISONS
Each Sub-Account may from time to time include in advertisements the ranking
of its performance figures compared with performance figures of other annuity
contract's sub-accounts with the same investment objectives which are created by
Lipper Analytical Services, Morningstar, Inc. or other recognized ranking
services.
HV-4900
27
[Financials to be filed by Amendment]
28
PART II
OTHER INFORMATION
ITEM 26. EXHIBITS
(1) Resolution of the Board of Directors of Hartford authorizing the
establishment of the Separate Account (1)
(2) Not Applicable
(3) (a) Principal Underwriter Agreement
(b) Form of Sales Agreement
(4) Not Applicable
(5) Form of Group Variable Funding Agreement (1)
(6) (a) Articles of Incorporation of Hartford (2)
(b) Bylaws of Hartford (2)
(7) Not Applicable
(8) Not Applicable
(9) (a) Form of Participation Agreement (1)
(9) (b) Reinsurance Agreement
(10) Not Applicable
(11) Not Applicable
(12) Opinion and Consent of Lisa Proch, Vice President and Assistant General
Counsel, to be filed by Amendment.
(13) Consent of Deloitte & Touche LLP, to be filed by Amendment.
(14) Copy of Power of Attorney
------------
(1) Incorporated by Reference to Post-Effective Amendment No.12 to the
Registration Statement File No. 333-114401, filed on April 28, 2010.
(2) Incorporated by Reference to Post-Effective Amendment No. 3 to the
Registration Statement File No. 333-148564, filed on February 9, 2009.
ITEM 27. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME POSITION WITH HARTFORD
------------------------------------------------------------------------------------------------------------------
Lydia M. Anderson (1) Vice President
Ricardo Anzaldua (1) Assistant Secretary, Senior Vice President
Robert Arena Executive Vice President
Thomas S. Barnes Vice President
Thomas E. Bartell Vice President
Beth A. Bombara (1) Chief Executive Officer, President, Chairman of the Board, Director*
John B. Brady Actuary, Vice President
Kathleen M. Bromage (1) Senior Vice President
Christopher S. Brown (2) Vice President
David A. Bulin Vice President
Michelle L. Buswell (3) Vice President
Thomas A. Campbell Actuary, Vice President
Jennifer Centrone Vice President
Karen Chamberlain (3) Vice President
Michael R. Chesman (1) Senior Vice President
Jared A. Collins (4) Vice President
Michael Concannon Executive Vice President
Ellen Conway Vice President
Robert A. Cornell Actuary, Vice President
Rochelle S. Cummings Vice President
James Davey Executive Vice President
Raymond E. DiDonna (1) Vice President
Joseph G. Eck (5) Vice President
George Eknaian Senior Vice President
Mark A. Esposito (1) Senior Vice President
Tamara L. Fagely (6) Vice President
Richard D. Fergesen (7) Vice President
Michael Fish Actuary, Vice President
Michael Frechette (1) Vice President
J. Bradford Galiney Vice President
John W. Gallant Vice President
John Glooch Vice President
Andrew S. Golfin, Jr. (1) Vice President
Christopher M. Grinnell Vice President
Richard Guerrini Vice President
Christopher J. Hanlon (2) Senior Vice President
Stephen B. Harris (1) Vice President
Michael R. Hazel Vice President, Controller
Andrew Hersey Vice President
Michael J. Hession (1) Senior Vice President
Elizabeth Horvath Actuary, Vice President
Penelope A. Hrib (8) Actuary, Vice President
Jeannie M. Iannello (9) Vice President
Donna R. Jarvis Actuary, Vice President
Thomas D. Jones Vice President
Kathleen E. Jorens (1) Assistant Treasurer, Vice President
Kristine J. Kelliher (1) Vice President
NAME POSITION WITH HARTFORD
------------------------------------------------------------------------------------------------------------------
Michael Knipper (1) Senior Vice President
Alan J. Kreczko (1) Executive Vice President, General Counsel
David R. Kryzanski (3) Vice President
Brian P. Laubacker (10) Vice President/Regional Sales
Michael LeBoeuf Vice President
Christopher M. Lewis (2) Senior Vice President
Edward P. Macdonald Vice President
Dana S. MacKinnon Vice President
Marialise Maroun (1) Vice President
Patrick H. McEvoy (7) Senior Vice President
William P. Meaney(2) Senior Vice President
Vernon Meyer Senior Vice President
Donato L. Monaco Vice President
Harry S. Monti, Jr. (3) Vice President
Thomas Moran (1) Director of Taxes, Senior Vice President
Craig D. Morrow Appointed Actuary, Vice President
Brian Murphy Executive Vice President
Brian J. Neary Vice President
Mark J. Niland (2) Senior Vice President, Director*
Robert W. Paiano (1) Treasurer, Senior Vice President, Director*
Brian Pedersen Vice President
Thomas C. Peloquin (1) Vice President/Financial Management
Colleen Pernerewski Vice President, Chief Compliance Officer of Individual Annuity
Glen-Roberts Pitruzzello (1) Vice President
Robert E. Primmer Senior Vice President
Darryl T. Rapini (1) Vice President
Kari A. Ratajczak Vice President
Sharon A. Ritchey Executive Vice President
David C. Robinson (1) Senior Vice President
Stephen A. Roche Vice President
Lori A. Rodden (1) Vice President
John P. Rogers (1) Vice President
Beverly L. Rohlik (9) Assistant Vice President, Chief Compliance Officer of Separate Accounts
Michael J. Roscoe Actuary, Senior Vice President
Andrew Rubino Vice President
Eric Russman Vice President
Peter F. Sannizzaro Senior Vice President Chief Accounting Officer, Chief Financial Officer
Wade A. Seward Vice President
Michael J. Shamburger Vice President
Terence Shields (1) Assistant Vice President, Corporate Secretary
Mark Sides (2) Vice President
Robert R. Siracusa Vice President
Mark M. Socha (1) Vice President
Kenneth J. Somers Vice President
Martin A. Swanson Vice President
Connie Tang (1) Actuary, Vice President
Diane E. Tatelman Vice President
Anthony Vidovich (1) Vice President
Joanie Wieleba (1) Vice President
NAME POSITION WITH HARTFORD
------------------------------------------------------------------------------------------------------------------
Scott D. Witter (3) Vice President
Jane Wolak (3) Senior Vice President
James M. Yanosy (1) Senior Vice President
------------
Unless otherwise indicated, the principal business address of each of the above
individuals is 200 Hopmeadow Street, Simsbury, CT 06089.
* Denotes Board of Directors.
(1) Address: One Hartford Plaza, Hartford, CT 06155
(2) Address: 55 Farmington Avenue, Hartford, CT 06105
(3) Address: 1 Griffin Road North, Windsor, CT 06095-1512
(4) Address: 31 St. James Ave., Suite 600, Boston, MA 02116-4190
(5) Address: 100 High Street, Boston, MA 02110-2301
(6) Address: 500 Bielenberg Drive, Woodbury, MN 55125
(7) Address: 7755 3rd Street North, Oakdale, MN 55128
(8) Address: 100 Campus Drive, Florham Park, NJ 07932-1006
(9) Address: 6820 Wedgwood Road North, Maple Grove, MN 55311-3574
(10) Address: 12412 Powerscourt Drive, Saint Louis, MO 63131
ITEM 28. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Attached hereto as Exhibit 1.
ITEM 29. INDEMNIFICATION
Section 33-776 of the Connecticut General Statutes states that: "a
corporation may provide indemnification of, or advance expenses to, a
director, officer, employee or agent only as permitted by sections 33-770
to 33-779, inclusive."
ARTICLE VIII, Section 1(a) of the By-laws of the Depositor (as amended
effective July 31, 2007) provides that the Corporation, to the fullest
extent permitted by applicable law as then in effect, shall indemnify any
person who was or is a director or officer of the Corporation and who was
or is threatened to be made a defendant or respondent in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative and whether formal or informal
(including, without limitation, any action, suit or proceeding by or in the
right of the Corporation to procure a judgment in its favor) (each, a
"Proceeding"), by reason of the fact that such a person was or is a
director or officer of the Corporation or, while a director or officer of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another domestic
or foreign corporation, partnership, joint venture, trust, employee benefit
plan or other entity (a "Covered Entity"), against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement and
actually and reasonably incurred by such person in connection with such
Proceeding. Any such former or present director or officer of the
Corporation finally determined to be entitled to indemnification as
provided in this Article VIII is hereinafter called an "Indemnitee". Until
such final determination is made such former or present director or officer
shall be a "Potential Indemnitee" for purposes of this Article VIII.
Notwithstanding the foregoing provisions of this Section 1(a), the
Corporation shall not indemnify an Indemnitee with respect to any
Proceeding commenced by such Indemnitee unless the commencement of such
Proceeding by such Indemnitee has been approved by a majority vote of the
Disinterested Directors (as defined in Section 5(d)); provided however,
that such approval of a majority of the Disinterested Directors shall not
be required with respect to any Proceeding commenced by such Indemnitee
after a Change in Control (as defined in Section 5(d)) has occurred.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 30. PRINCIPAL UNDERWRITERS
(a) MMLD acts as principal underwriter for the following investment
companies:
Hartford Life Insurance Company - DC Variable Account I
Hartford Life Insurance Company - Separate Account Two
Hartford Life Insurance Company - Separate Account Two (DC Variable Account
II)
Hartford Life Insurance Company - Separate Account Two (QP Variable
Account)
Hartford Life Insurance Company - Separate Account Two (NQ Variable
Account)
Hartford Life Insurance Company - Separate Account Eleven
Hartford Life Insurance Company - Separate Account Twelve
(b) Officers and Member Representatives of MML Distributors, LLC
POSITIONS AND OFFICES PRINCIPAL BUSINESS
NAME WITH UNDERWRITER ADDRESS
---------------------------------------------------------------------------------------------------
Elaine A. Sarsynski Chief Executive Officer *
President
Springfield OSJ Supervisor
Michael Fanning Member Representative *
Robert S. Rosenthal Vice President *
Chief Legal Officer
Secretary
Susan Scanlon Vice President *
Eric Wietsma Vice President *
Retirement Services Supervisor
Fund Product Distribution Officer
Richard Zayicek National Sales Supervisor **
Vice President
Edward K. Duch, III Assistant Secretary *
Jennifer L. Dupuis-Krause Assistant Secretary *
Christine Peaslee Assistant Secretary *
Nathan Hall Chief Financial Officer *
Treasurer
Bruce C. Frisbie Assistant Treasurer ***
Kevin LaComb Assistant Treasurer *
Donna Watson Cash and Trading Supervisor *
Assistant Treasurer
Barbara Upton Assistant Vice President *
Chief Compliance Officer
Kathy Rogers Continuing Education Officer *
Stephen Alibozek Entity Contracting Officer *
Mario Morton Registration Manager *
Domenic Luppino Chief Technology Officer *
H. Bradford Hoffman Chief Risk Officer *
Melissa Millan USIG Product/Sales Supervisor ***
Dana Tatro Variable Annuity Product Distribution ***
Officer
Variable Annuity Supervisor
Craig Waddington Variable Life Product Distribution ***
Officer
Douglas Endorf Executive Benefits Product Distribution ***
Officer
Michele White Enfield OSJ Supervisor ***
------------
* 1295 State Street, Springfield, MA 01111-0001
** 200 Cape Code Way, Mooresville, NC 28117
*** 100 Bright Meadow Boulevard, Enfield, CT 06082-1981
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
All of the accounts, books, records or other documents required to be kept
by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by Massachusetts Mutual Life Insurance Company,
as administrator at 1295 State Street, Springfield, MA 01111.
ITEM 32. MANAGEMENT SERVICES
All management contracts are discussed in Part I of this registration
statement.
ITEM 33. REPRESENTATION OF REASONABLENESS OF FEES
Hartford hereby represents that the aggregate fees and charges under the
Agreement are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Hartford.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf, in the Town of Simsbury, and
State of Connecticut on this 14th day of February, 2013.
HARTFORD LIFE INSURANCE COMPANY -
SEPARATE ACCOUNT TWELVE
(Registrant)
By: /s/ Beth A. Bombara *By: /s/ Sadie R. Gordon
----------------------------------- -----------------------------------
Beth A. Bombara Sadie R. Gordon
Chief Executive Officer, Attorney-In-Fact
President and Chairman of the
Board*
HARTFORD LIFE INSURANCE COMPANY
(Depositor)
By: /s/ Beth A. Bombara
-----------------------------------
Beth A. Bombara
Chief Executive Officer,
President and Chairman of the
Board*
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons and in the capacity and
on the date indicated.
Beth A. Bombara, Chief Executive Officer,
President, Chairman of the Board, Director*
Mark J. Niland, Senior Vice President, Director* *By: /s/ Sadie R. Gordon
-----------------------------------
Robert W. Paiano, Senior Vice President, Sadie R. Gordon
Treasurer, Director* Attorney-in-Fact
Peter F. Sannizzaro, Chief Accounting Officer, Date: February 14, 2013
Chief Financial Officer, Senior Vice President*
333-114404
EXHIBIT INDEX
(1) Organizational Chart.
(2) Principal Underwriter Agreement.
(3) Form of Sales Agreement.
(4) Reinsurance Agreement.
(5) Copy of Power of Attorney.
EX-99.1
2
a13-1951_1ex99d1.txt
EX-99.1
THE HARTFORD
ORGANIZATIONAL LIST
THE HARTFORD FINANCIAL SERVICES GROUP, INC. (Delaware) (1)
Heritage Holdings, Inc. (Connecticut) (1)
Heritage Reinsurance Company, Ltd. (Bermuda) (7)
Excess Insurance Company Limited (U.K.)
First State Insurance Company (Connecticut)
New England Insurance Company (Connecticut)
New England Reinsurance Corporation (Connecticut)
Hartford Fire Insurance Company (Connecticut)
Hartford Insurance Company of Illinois (Illinois)
Catalyst360, LLC (Delaware)
Hartford Underwriters General Agency, Inc. (Texas)
Hartford of Texas General Agency, Inc. (Texas)
Twin City Fire Insurance Company (Indiana)
Hartford Technology Service Company (Connecticut) (2)
Hartford Integrated Technologies, Inc. (Connecticut) (2)
Access Coveragecorp, Inc. (North Carolina)
Access Coveragecorp Technologies, Inc. (North Carolina)
1st Agchoice, Inc. (South Dakota)
Business Management Group, Inc. (Connecticut) (2)
Nutmeg Insurance Agency, Inc. (Connecticut) (2)
Hartford Lloyds Corporation (Texas) (2)
Hartford Lloyds Insurance Company (Partnership) (Texas)
Claimplace, Inc. (Delaware)
Ersatz Corporation (Delaware) (2)
HRA Brokerage Services, Inc. (Connecticut) (2)
Hartford Accident and Indemnity Company (Connecticut)
Hartford Casualty Insurance Company (Indiana)
Archway 60 R, LLC (Delaware)
Symphony R, LLC (Delaware)
Sunstone R, LLC (Delaware)
RVR R, LLC (Delaware)
Hartford Underwriters Insurance Company (Connecticut)
Hartford Fire General Agency, Inc. (Texas)
Hartford Casualty General Agency, Inc. (Texas)
Trumbull Insurance Company (Connecticut)
Hartford Specialty Insurance Services of Texas, LLC (Texas) (2)
Horizon Management Group, L.L.C. (Delaware) (2)
Downlands Liability Management Ltd. (U.K.)
Hartford Technology Services Company, L.L.C. (Delaware) (2)
Property & Casualty Insurance Company of Hartford (Indiana)
White River Life Reinsurance Company (Vermont)
Champlain Life Reinsurance Company (Vermont)
Sentinel Insurance Company, Ltd. (Connecticut)
Pacific Insurance Company, Limited (Connecticut)
Hartford Insurance Company of the Southeast (Connecticut)
Hartford Insurance Company of the Midwest (Indiana)
Hartford Strategic Investments, LLC (Delaware)
FTC Resolution Company, LLC (Delaware) (1)
Hartford Investment Management Company (Delaware) (2)
New Ocean Insurance Co., Ltd. (Bermuda)
Hartford Holdings, Inc. (Delaware) (1) (3)
Hartford Life, Inc. (Delaware) (1)
Hartford Life Insurance, K.K. (Japan)
Revere R, LLC (Delaware)
Eloy R, LLC (Delaware) (40%)
220 Davidson R, LLC (Delaware) (50%)
Meridian R, LLC (Delaware)
DMS R, LLC (Delaware)
Hartford Life and Accident Insurance Company (Connecticut)
M-Cap Insurance Agency, LLC (Delaware)
Hartford Administrative Services Company (Minnesota)
Planco, LLC (Delaware)
Hartford Life Distributors, LLC (Delaware) (2)
Hartford Life Private Placement, LLC (Delaware)
The Evergreen Group Incorporated (New York) (2)
American Maturity Life Insurance Company (Connecticut)
Hartford Life Insurance Company (Connecticut)
OL R, LLC (Delaware)
Eloy R, LLC (Delaware) (60%) (5)
220 Davidson R, LLC (Delaware) (50%) (6)
Hartford International Life Reassurance Corporation (Connecticut)
Lanidex Class B, LLC (Delaware)
Hartford Life and Annuity Insurance Company (Connecticut)
Hartford Life International, Ltd. (Connecticut) (1)
Hartford International Global Distribution (Bermuda) Ltd. (Bermuda)
The Hartford International Asset Management Company Limited (Ireland)
Hartford Life Limited (Ireland)
Thesis, S.A. (Argentina)
Hartford Life, Ltd. (Bermuda)
Woodbury Financial Services, Inc. (Minnesota)
Hartford Financial Services, LLC (Delaware) (1)
HL Investment Advisors, LLC (Connecticut) (2)
Hartford Investment Financial Services, LLC (Delaware) (2)
Hartford Retirement Services, LLC (Delaware)
Hartford Equity Sales Company, Inc. (Connecticut) (2)
Hartford Securities Distribution Company, Inc. (Connecticut) (2)
Hartford-Comprehensive Employee Benefit Service Company (Connecticut) (4)
Nutmeg Insurance Company (Connecticut)
Trumbull Flood Management, LLC (Connecticut)
Hartford Residual Market, L.L.C. (Connecticut)
Hart Re Group, L.L.C. (Connecticut) (1)
HARTRE Company, LLC (Connecticut)
Fencourt Reinsurance Company, Ltd. (Bermuda)
HLA, LLC (Connecticut)
Hartford Financial Products International Limited (U.K.)
Hartford Management, Ltd. (Bermuda) (1)
Hartford Insurance, Ltd. (Bermuda)
**OWNERSHIP IS 100% UNLESS OTHERWISE NOTED.
ENDNOTES:
(1) Holding Company
(2) Investment and Investment Service Company
(3) Hartford Fire Insurance Company owns 100% of the issued and outstanding Preferred Stock of Hartford
Holdings, Inc. The Hartford Financial Services Group, Inc., is the owner of 100% of the issued and
outstanding common shares of Hartford Holdings, Inc.
(4) Third Party Administrator
(5) Eloy R, LLC is jointly owned by Hartford Life, Inc. (40%) and Hartford Life Insurance Company (60%).
(6) 220 Davidson R, LLC is jointly owned by Hartford Life, Inc. (50%) and Hartford Life Insurance Company
(50%).
(7) Heritage Reinsurance Company, Ltd. is jointly owned by Hartford Fire Insurance Company (99%) and Heritage
Holdings, Inc. (1%).
EX-99.2
3
a13-1951_1ex99d2.txt
EX-99.2
EXECUTION COPY
PRINCIPAL UNDERWRITER AGREEMENT
THIS AGREEMENT, dated as of January 1, 2013 (this "Agreement") is made by and
among Hartford Life Insurance Company ("INSURER"), MML Distributors, LLC
("BROKERDEALER") and solely for the purpose of acknowledging Article III hereof,
Massachusetts Mutual Life Insurance Company ("BUYER").
WITNESSETH:
WHEREAS, the Board of Directors of INSURER has made provision for the
establishment of one or more separate accounts within INSURER in accordance with
the laws of the State of Connecticut, each of which was organized, established
and registered as a unit investment trust type investment company (each, a
"UIT") with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended ("1940 Act"), such separate accounts
and products offered through such separate accounts, as listed on Schedule A;
and
WHEREAS, BROKER-DEALER has been appointed by INSURER to form selling groups of
duly licensed and registered third party broker-dealers (the "TPBs") to
distribute to the public certain group variable annuity products issued by the
INSURER (each, a "Contract") registered under the Securities Act of 1933, as
amended ("1933 Act").
NOW THEREFORE, in consideration of the mutual agreements made herein, the
parties mutually agree as follows:
I. BROKER-DEALER'S DUTIES
1. BROKER-DEALER shall have the right (but no obligation) to form selling
groups of TPBs to distribute the Contracts. In connection with its duties
as principal underwriter, BROKER-DEALER is responsible for compliance with
all applicable requirements of the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), the 1940 Act, and state and federal rules
and regulations relating to the sales and distribution of the Contract,
including without limitation, FINRA requirements. BROKER-DEALER shall not
assume any responsibility for continued compliance of the TPBs and their
associated persons with applicable laws, including federal and state
securities laws, insurance laws, and FINRA rules and requirements.
2. BROKER-DEALER agrees that it will not use any prospectus, sales literature,
or any other printed matter or material or offer for sale or sell the
Contract if any of the foregoing in any way represent the duties,
obligations, or liabilities of INSURER as being greater than, or different
from, such duties, obligations and liabilities as are set forth in this
Agreement, as it may be amended from time to time.
3. BROKER-DEALER agrees that it will utilize the then currently effective
prospectus relating to a UIT's Contracts in connection with its selling
efforts. As to the other types of sales materials, BROKER-DEALER agrees
that it will use only sales materials which conform to the
requirements of federal, state and/or self regulatory organization laws and
regulations and which have been filed, where necessary, with the appropriate
regulatory authorities.
1. From and after the date hereof, BROKER-DEALER agrees that it or its duly
designated agent shall maintain records of the name and address of, and the
securities issued by each UIT and held by, every holder of any security
issued pursuant to this Agreement, as required by the Section 26(a)(4) of
the 1940 Act.
2. BROKER-DEALER's services pursuant to this Agreement shall not be deemed to
be exclusive, and it may render similar services and act as an underwriter,
distributor, or dealer for other investment companies in the offering of
their shares.
3. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties hereunder on the part of
BROKER-DEALER, BROKER-DEALER shall not be subject to liability under a
Contract for any act or omission in the course, or connected with,
rendering services hereunder.
II. UIT AND INSURER OBLIGATIONS
1. The UIT reserves the right at any time to suspend or limit the public
offering of the Contracts upon 30 days' written notice to BROKER-DEALER,
except where the notice period may be shortened because of legal action
taken by any regulatory agency.
2. INSURER has prepared or caused to be prepared in accordance with applicable
laws registration statements describing the Contracts, together with
exhibits thereto (the "Registration Statements"). The Registration
Statements include prospectuses (the "Prospectuses") for the Contracts.
3. The UITs and INSURER agree to advise BROKER-DEALER immediately:
(a) Of any request by the SEC for amendment of its Registration
Statement or for additional information;
(b) Of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement relating to units of
interest issued with respect to the UIT or of the initiation of any
proceedings for that purpose;
(c) Of any other action of the SEC or any authorities of any state or
territory, of which it is aware, affecting registration or
qualification of the UIT, or rights to offer the Contracts for sale;
and
(d) Of the happening of any material event, if known, which makes untrue
any statement in said Registration Statement or which requires a
change therein in order to make any statement therein not misleading.
If any event shall occur as a result of which it is necessary to amend or
supplement the Registration Statements in order to make the statements therein,
in light of the circumstances under which they were or are made, true, complete
or not misleading, INSURER shall forthwith
2
prepare and furnish to BROKER-DEALER, without charge, amendments or supplements
to the Registration Statements sufficient to make the statements made in the
Registration Statements as so amended or supplemented true, complete and not
misleading in light of the circumstances under which they were made.
INSURER will furnish to BROKER-DEALER such information with respect to each
Contract in such form and signed by such of its officers and directors as
BROKER-DEALER may reasonably request and will warrant that the statements
therein contained when so signed are true and correct. INSURER will also
furnish, from time to time, such additional information regarding the UIT's
financial condition as BROKER-DEALER may reasonably request.
III. COMPENSATION
The parties acknowledge that, under the Reinsurance Agreement dated January 1,
2013 (the "Reinsurance Agreement") by and between INSURER and BUYER, INSURER is
obliged to pay to BUYER Recoverables (as defined in the Reinsurance Agreement)
that it receives from Hartford Securities Distribution Company, Inc. (such
Recoverables, "HSD Revenue"). BROKER-DEALER may, by written notice to INSURER,
require INSURER to pay BROKERDEALER, as compensation for its services hereunder,
all or any part of the HSD Revenue. BUYER acknowledges that any payments of HSD
Revenue to BROKER-DEALER hereunder shall extinguish INSURER's obligation to pay
such HSD Revenue to BUYER under the Reinsurance Agreement.
IV. RESIGNATION AND REMOVAL OF PRINCIPAL UNDERWRITER
To the extent permitted under the Reinsurance Agreement, BROKER-DEALER may
resign as a Principal Underwriter hereunder, upon 120 days' prior written notice
to INSURER. However, such resignation shall not become effective until either
the UIT has been completely liquidated and the proceeds of the liquidation
distributed through INSURER to the Contract owners or a successor Principal
Underwriter has been designated and has accepted its duties.
V. MISCELLANEOUS
1. This Agreement may not be assigned by any of the parties hereto without the
written consent of the other party.
2. All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage
prepaid, addressed each respective party as each party may designate in
writing from time to time.
3. This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original and all of which shall be deemed one
instrument, and an executed copy of this Agreement and all amendments
hereto shall be kept on file by INSURER and shall be open to inspection any
time during the business hours of INSURER.
4. This Agreement shall inure to the benefit of and be binding upon the
successor of the parties hereto.
5. This Agreement shall be construed and governed by and according to the laws
of the State of New York (without regard to conflict of laws principles
that might lead to the application of the laws of another jurisdiction).
6. This Agreement may be modified according to the mutual agreement and
consent of the parties hereto, consent not to be unreasonably withheld by
either party.
7. This Agreement shall become effective from the date first written above and
shall continue and remain in effect until its automatic termination in the
event of (a) its assignment or
3
(b) the termination of the Reinsurance Agreement, provided that its
continuance is specifically approved at least annually by a majority of the
members of the board of directors of INSURER.
8. INSURER shall use its reasonable best efforts to procure that the
continuance of this Agreement is specifically approved at least annually by
a majority of the members of its board of directors pursuant to paragraph
7(b) of this Article V. If this Agreement is terminated as a result of the
failure of a majority of the members of the board of directors of INSURER
to approve its continuance, INSURER shall use its reasonable best efforts
to secure an arrangement reasonably satisfactory to BROKER-DEALER under
which BROKER-DEALER would, in compliance with applicable law, obtain the
benefits and assume the obligations and bear the economic burdens of this
Agreement.
[Remainder of page intentionally left blank.]
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first written above.
HARTFORD LIFE INSURANCE COMPANY
By: /s/ David S. Robinson
-----------------------------------
Name: David S. Robinson
Title: Sr. Vice President
Principal Underwriter Agreement Signature Page
MML DISTRIBUTORS, LLC:
By: /s/ Elaine Sarsynski
-----------------------------------
Name: Elaine Sarsynski
Title Chief Executive Officer & President
Principal Underwriter Agreement Signature Page
SOLELY FOR THE PURPOSE OF ACKNOWLEDGING
ARTICLE III:
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By: /s/ William Silvanic
-----------------------------------
Name: William Silvanic
Title: Senior Vice President
Principal Underwriter Agreement Signature Page
SCHEDULE A LIST OF SEPARATE ACCOUNTS AND PRODUCTS OFFERED THROUGH SUCH SEPARATE
ACCOUNTS
FILE TYPE FILE NUMBER PRODUCT NAME
--------------------------------------------------------------------------------------------------------------------
DC VARIABLE ACCOUNT I
N-4 033-19944 HV-1915 -- Group Variable Annuity Contracts
N-4 033-19944 HV-2138 -- Group Variable Annuity Contracts
N-4 033-19947 HV-1009 -- Group Variable Annuity Contracts
SEPARATE ACCOUNT TWO
N-4 033-19949 HV-1009 -- Group Variable Annuity Contracts
N-4 033-59541 HV-2025 -- Group Variable Annuity Contracts for Section 403(b) or 408 Plans
N-4 033-19946 HV-1524 -- Group Variable Annuity Contracts (Gardner & White)
N-4 033-19943 HV-1531 -- NQ Variable Account
N-4 033-19948 HV-1008 -- Variable Account QP
SEPARATE ACCOUNT ELEVEN
N-4 333-72042 HV-3574 -- PremierSOLUTIONS Standard
N-4 333-72042 HV-5244 -- PremierSOLUTIONS Standard (Series II)
N-4 333-72042 HV-5795 -- PremierSOLUTIONS Standard (Series A)
N-4 333-72042 HV-6779 -- PremierSOLUTIONS Standard (Series A-II)
N-4 333-72042 HV-5776 -- PremierSOLUTIONS Cornerstone
N-4 333-72042 HV-6775 -- PremierSOLUTIONS Cornerstone (Series II)
N-4 333-72402 HV-3572 -- PremierSOLUTIONS State of Connecticut
N-4 333-72042 HV-3573 -- PremierSOLUTIONS Chicago Public Schools
N-4 333-72042 HV-4899 -- PremierSOLUTIONS New Jersey Institutions of Higher Education
N-4 333-72042 HV-7969 -- State of Iowa Retirement Investors Club 403(b)
N-4 333-145655 HV-3739 -- Group Variable Annuity Contracts
N-4 333-151805 HV-6776 -- Premier Innovations(SM)
N-4 333-151805 HV-6778 -- Premier Innovations(SM) (Series II)
N-4 333-151805 HV-6777 -- Hartford 403(b) Cornerstone Innovations (SM)
SEPARATE ACCOUNT TWELVE
S-6 333-114401 HV-4824 -- Group Variable Funding Agreements -- The HART Program
S-6 333-114404 HV-4900 -- Group Variable Funding Agreements -- The HART Program
Schedule A-1
EX-99.3
4
a13-1951_1ex99d3.txt
EX-99.3
[LOGO]
MASSMUTUAL
FINANCIAL GROUP(SM)
FORM OF SALES AGREEMENT
SELLING AGREEMENT
This Selling Agreement ("Agreement") is made by and among MML Distributors, LLC
("Distributors"), a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934 ("1934 Act") and a
member of the Financial Industry Regulatory Authority, Inc. ("FINRA"),
Massachusetts Mutual Life Insurance Company, a mutual life insurance company
domiciled in the Commonwealth of Massachusetts ("MassMutual"), and,
("Producer"). Producer is:
either an independent broker-dealer registered with the SEC under the 1934 Act,
a member of FINRA (a "Broker-Dealer") and has the authority from FINRA to sell
and service the Products (as defined below) which it intends to sell and service
pursuant to this Agreement; or a bank as defined by Section 3(a)(6) of the 1934
Act and Article I(b) of the FINRA By-Laws; and/or an entity duly authorized
under the insurance laws of one or more states or other jurisdictions to
solicit, sell, negotiate and service insurance products (an "Insurance Agency").
If Producer is a Broker-Dealer, the term "Producer" shall also include any and
all undersigned Insurance Agency affiliates of Broker-Dealer, subject to the
conditions set forth in Exhibit A to this Agreement. This Agreement shall become
effective at 11:59:59 p.m. New York time, on the Closing Date (as defined below)
(the "Effective Time").
RECITALS
WHEREAS, MassMutual, Hartford Life, Inc., an indirect wholly-owned subsidiary of
The Hartford Financial Services Group, Inc. ("Hartford") and, with respect to
certain specified provisions, Hartford, have entered into that certain Purchase
and Sale Agreement pursuant to which Hartford has agreed to sell and MassMutual
has agreed to purchase the Hartford Retirement Plans Group business ("RPG") (the
"Transaction");
WHEREAS, the closing of the Transaction (the "Closing") is expected to occur in
the fourth quarter of 2012 or the first quarter of 2013, with the date of the
Closing to be determined after MassMutual and Hartford each obtain applicable
regulatory approvals (such date referred to herein as the "Closing Date");
WHEREAS, Hartford and its affiliates currently offer various products and
services to retirement plans ("Plans") through RPG;
WHEREAS, following the Closing Date, MassMutual or Distributors, as applicable,
will be responsible for distributing the retirement plan products of RPG
including, without limitation, certain variable annuity contracts issued by
Harford Life Insurance Company ("HLIC") which are deemed to be securities and
are required to be registered under the Securities Act of 1933 (the "1933 Act")
and the Investment Company Act of 1940 (the "Registered Annuity Products"),
certain group variable annuity contracts and other contracts issued by HLIC that
are exempt from such registration (the "Nonregistered Products") and shares or
units of mutual funds, collective trusts and other pooled investment vehicles
("Funds") made available through RPG's mutual fund platform (the "Mutual Fund
Platform"; and together with the Registered Annuity Products and the
Nonregistered Products, the "Products");
WHEREAS, effective as of the Effective Time, Distributors shall act as principal
underwriter of the Registered Annuity Products and distributor of the Mutual
Fund Platform and MassMutual will distribute the Nonregistered Products
currently offered by RPG;
WHEREAS, Producer previously entered into a Broker-Dealer Sales and Supervision
Agreement or other selling agreement(s) with Hartford Securities Distribution
Company, Inc. ("HSD"), HLIC and/or other Hartford affiliates authorizing
Producer to sell and service some or all of the Products (the "Hartford Selling
Agreement");
WHEREAS, effective as of the Closing Date, HSD and its affiliates will amend,
restate or terminate the Hartford Selling Agreement to remove the Products from
the Hartford Selling Agreement;
WHEREAS, Producer desires to sell and service some or all of the Products; and
WHEREAS, MassMutual and Distributors, as applicable, wish to appoint and
authorize Producer to sell and service the Products to the same extent Producer
was appointed or authorized to sell and service the Products, and subject to the
same compensation arrangements provided for, under the Hartford Selling
Agreement;
NOW THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants contained in this Agreement, and intending to be legally bound hereby,
the parties agree to the following:
1. AUTHORIZATION/APPOINTMENT
1.1 AUTHORIZATION TO SELL REGISTERED ANNUITY PRODUCTS. Subject to the
terms and conditions of this Agreement, Distributors and MassMutual hereby
appoint and authorize Producer, to the extent that it is both a
Broker-Dealer and an Insurance Agency, to solicit sales of and provide
services with respect to the Registered Annuity Products, in each state
where Producer is properly insurance licensed.
1.2 AUTHORIZATION TO SELL NONREGISTERED PRODUCTS. Subject to the terms and
conditions of this Agreement, MassMutual hereby appoints and authorizes
Producer, to the extent that it is an Insurance Agency, to solicit sales of
and provide services with respect to the Nonregistered Products, in each
state where Producer is properly insurance licensed.
Upon the request of Producer, MassMutual will uses its reasonable efforts
to arrange for the appointment of Producer's representatives as insurance
agents for the sale and solicitation of the Registered Annuity Products
and/or Nonregistered Products, as applicable, provided that Producer shall
be responsible for ensuring that each of its representatives is properly
insurance licensed.
1.3 AUTHORIZATION TO SELL MUTUAL FUND PLATFORM. Subject to the terms and
conditions of this Agreement, Distributors hereby authorizes Producer, to
the extent that it is a Broker-Dealer, to solicit sales of and provide
services with respect to the Mutual Fund Platform to Plans.
2
1.4 OBLIGATIONS/LIMITATIONS WITH RESPECT TO SALES.
No person is authorized to make any representation concerning a
Product or a Fund except for those representations contained in the
then current prospectus, statement of additional information or other
applicable disclosure document (each a "Prospectus" or "Offering
Document") of the Product or Fund, as applicable. Producer hereby
acknowledges that Distributors and MassMutual have made no
representations with respect to any Product or Fund in addition to, or
conflicting with, the terms of this Agreement or the applicable
Prospectus or Offering Document. To the extent that any Prospectus or
Offering Document contains any provision that is inconsistent with the
terms of this Agreement or any materials or statements from
Distributors or MassMutual, the terms of the Prospectus or Offering
Document shall be controlling. Distributors reserves the right in its
discretion, without notice, to suspend sales or withdraw the offering
or inclusion of any Fund at any time provided that neither MassMutual
nor Distributors will exercise discretion with respect to the
investments made available in any Plan.
Producer acknowledges and agrees that certain Products or Funds,
pursuant to the terms of the applicable Prospectus or Offering
Document, may be offered for sale only to (i) Plans and their related
trusts that have been determined by the Internal Revenue Service to be
qualified for tax exemption under section 401(a) and 501(a),
respectively, of the Internal Revenue Code of 1986 as amended (the
"Code"); (ii) governmental Plans within the meaning of section 414(d)
of the Code; and (iii) eligible governmental deferred compensation
Plans meeting the requirements of section 457(b) of the Code
(collectively "Qualified Plans"), excluding however, certain Plans
that cover individuals, some or all of whom are self-employed, as
further described in the Prospectus or Offering Document (such
eligible investors are collectively referred to as "Qualified
Investors"). Producer shall not offer any Product or Fund for sale to
a Plan or its related trusts except pursuant to the terms of the
Fund's Prospectus or Offering Document.
If the Funds are offered in more than one class of shares as described
in the applicable Prospectus or Offering Document, or purchase of a
class of shares is subject to restrictions and guidelines as stated in
the applicable Prospectus or Offering Document, Producer shall be
responsible for determining whether the Mutual Fund Platform and any
and all Funds available are suitable for a Plan or Plan participant,
as applicable; provided, however, that nothing herein shall be
construed to indicate that Producer is acting as an ERISA fiduciary
with respect to a Plan.
The various Products or Funds, pursuant to applicable federal law, may
require Producer to observe written policies and procedures reasonably
designed to detect and prevent frequent and/or disruptive trading in
shares, interests or units. Producer shall cooperate with reasonable
administration of such polices as applicable.
3
1.5 ACCEPTANCE OF AUTHORITY. Producer accepts such appointments on a
non-exclusive basis and agrees to use its best efforts to find purchasers
for the Products acceptable to the MassMutual and Distributors, as
applicable.
2. AUTHORITY OF THE PRODUCER
2.1 Producer has the authority to represent Distributors and MassMutual
only to the extent expressly granted in this Agreement. Producer and its
representatives shall not hold themselves out to be employees of MassMutual
or Distributors in any dealings with the public. Producer and its
representatives shall be independent contractors as to MassMutual and
Distributors as applicable. Nothing contained herein is intended to create
a relationship of employer and employee between Producer and MassMutual or
Distributors or between Producer's representatives and MassMutual or
Distributors.
2.2 Producer authorizes MassMutual to seek, on its own behalf and on
behalf of Product manufacturers, background and investigative consumer
reports as to any representatives submitted for appointment to sell the
Products.
3. PRODUCER REPRESENTATIONS
3.1 Producer represents that this Agreement has been duly authorized,
executed and delivered by Producer, constitutes a valid and legally binding
obligation, and that neither the execution and delivery of this Agreement
by Producer nor the consummation of the transactions contemplated herein
will result in a breach or violation of any applicable provision of law,
the rules and regulations of FINRA, including, without limitation the FINRA
Conduct Rules, or any judicial or administrative orders in which Producer
is named or any material agreement or instrument to which Producer is a
party or by which Producer is bound.
3.2 If Producer sells or intends to sell the Registered Annuity Product or
the Mutual Fund Platform, Producer represents that it is either: a
registered broker-dealer under the 1934 Act, a member in good standing of
FINRA and a registered broker-dealer under applicable state law to the
extent necessary to perform the duties described in this Agreement, or a
bank as defined by Section 3(a)(6) of the 1934 Act and exempt from such
registration and membership. If Producer is a Broker-Dealer, represents
that its registered representatives, who will be soliciting applications
for the Registered Annuity Products and distributing the Mutual Fund
Platform, will be duly registered representatives associated with
Broker-Dealer and that they will be representatives in good standing with
accreditation as required by FINRA to sell the Registered Annuity Products
and the Mutual Fund Platform. In the event Producer is a Broker-Dealer,
Producer agrees to abide by all rules and regulations of FINRA, including,
without limitation the FINRA Conduct Rules, and to comply with all
applicable state and federal laws and rules, and regulations of the
authorized regulatory agencies, affecting the sale of the Products by
Producer or any of its associated registered representatives.
4
3.3 Producer represents that it complies with the provisions of 31 U.S.C.
Section 5318(h), also known as Section 352 of the USA PATRIOT Act, and all
applicable implementing regulations promulgated by either the Secretary of
the U.S. Treasury or the SEC. Such compliance shall include but not be
limited to the development and implementation of an anti-money laundering
program; "Know Your Customer" identification and verification procedures in
compliance with implementing regulations promulgated pursuant to Section
326 of the USA PATRIOT Act; financial transaction monitoring/surveillance
procedures to determine whether any client is engaging in suspicious
activities that should be reported to the U.S. Treasury Department's
Financial Crimes Enforcement Network office; and a protocol to facilitate
appropriate federal regulatory examiners obtaining information and records
regarding your anti-money laundering program and to conduct inspections for
purposes of the program.
Producer represents it will not sell any Product to: (1) any investor
listed on the U.S. Treasury Department's Office of Foreign Assets Control
("OFAC") list of prohibited persons, entities, and countries, and for which
any MassMutual or Distributor transactions with such investor are
prohibited under the various economic sanctions laws and regulations
administered by OFAC, or (2) a foreign shell bank. A "foreign shell bank"
is defined as a bank that (a) does not maintain a physical presence in any
jurisdiction; and (b) is not (i) an affiliate of a bank that maintains a
physical presence, and (ii) subject to regulation by the governmental
authority that regulates the non-shell bank affiliate.
Producer represents it will cooperate and share information with MassMutual
and Distributors pursuant to Sections 312 and 313 of the USA PATRIOT Act so
as to enable each of MassMutual and Distributors to conduct enhanced due
diligence monitoring of customer activity involving any customer identified
as a senior foreign political figure or maintaining a residence in a
jurisdiction deemed non-cooperative in the fight against international
money laundering by the Financial Action Task Force.
4. PRODUCER OBLIGATIONS
4.1 TRAINING AND SUPERVISION. Producer has full responsibility for the
training and supervision of all of Producer's representatives and any other
persons associated with Producer and any other persons who are engaged
directly or indirectly in the offer or sale of the Products. Producer
shall, during the term of this Agreement, establish and implement
reasonable procedures for periodic inspection and supervision of sales
practices of its representatives including all applicable continuing
education requirements.
If Producer is a Broker-Dealer, and a registered representative of Producer
ceases to be a registered representative of Producer, is disqualified for
continued FINRA registration or has his or her registration suspended or
revoked by FINRA or any other securities regulatory authority or otherwise
fails to meet the rules and standards imposed by Producer, Producer shall
immediately notify such registered
5
representative that he or she is no longer authorized to solicit
applications for the sale of Products on behalf of MassMutual and/or
Distributors. Producer shall immediately notify MassMutual of such
termination or suspension or failure to abide by the rules and standards of
Producer.
4.2 SOLICITATION.
Producer agrees to supervise its representatives so that they will
only solicit applications in states where the Products are approved
for sale and where the representatives are properly licensed and
appointed in accordance with applicable state laws. MassMutual shall
notify Producer of the availability of the Products in each state.
4.3 IMPROPER REPLACEMENT.
Producer and its registered representatives shall not make any
misrepresentation or materially incomplete comparison of Products for
the purpose of inducing a current or potential contract owner or
policy holder to lapse, forfeit or surrender his or her current
insurance contract in favor of purchasing MassMutual's or other
insurer's product. Communication with clients shall include sufficient
information regarding the appropriateness of the transaction to allow
the client or potential client to make an informed decision.
4.4 PROSPECTUS DELIVERY AND SUITABILITY REQUIREMENTS.
Producer shall ensure that its representatives comply with the
prospectus delivery requirements under the 1933 Act as applicable. In
addition, Producer shall ensure that its representatives shall not
make recommendations to an applicant to purchase a Product in the
absence of reasonable grounds to believe that the purchase is suitable
for such applicant, as required by applicable state insurance laws,
the suitability requirements of the 1934 Act and applicable FINRA
rules. Producer shall ensure that each application obtained by its
representatives shall bear evidence of approval by one of its
principals indicating that the application has been reviewed for
suitability in accordance with applicable law.
4.5 PROMOTIONAL MATERIAL.
Producer and its representatives are not authorized to provide any
information or make any representation in connection with this
Agreement or the solicitation of the Products other than those
contained in the prospectus or in other promotional material produced
or authorized by MassMutual or, as applicable, Distributors.
Producer agrees that it has full responsibility for any training or
other promotional material it distributes to sales personnel unless
the prior written approval of MassMutual has been obtained.
6
4.6 RECORD KEEPING.
Producer is responsible for maintaining the records of its
representatives. Producer shall maintain such other records as are
required of it by applicable laws and regulations. The books, accounts
and records maintained by Producer that relate to the sale of the
Products, or dealings with MassMutual or Distributors shall be
maintained so as to clearly and accurately disclose the nature and
details of each transaction.
Producer acknowledges that all the records maintained by Producer
relating to the solicitation, service or sale of the Products subject
to this Agreement, including but not limited to applications,
authorization cards, complaint files, supervisory and inspection
procedures and suitability reviews, shall be available to MassMutual,
Distributors, any regulator or any third party acting on behalf of
MassMutual or Distributors, upon request during normal business hours.
MassMutual, Distributors, any regulator and any third party acting on
behalf of MassMutual or Distributors may retain copies of any such
records which they, in their discretion, deem necessary or desirable
to keep.
4.7 REFUND OF COMPENSATION.
Producer agrees to repay MassMutual the total amount of any
compensation which may have been paid to it within thirty (30)
business days of notice of the request for such refund should
MassMutual for any reason return any premium or other deposits on a
Product which was solicited by a representative of Producer.
5. MASSMUTUAL'S AND/OR DISTRIBUTOR'S OBLIGATIONS
5.1 COMPENSATION.
MassMutual or Distributors, as applicable, hereby assumes Hartford's
and its affiliates' obligations under the Hartford Selling Agreement
in respect of the Products to the extent that such obligations (i)
accrue in respect of any period following the Closing Date or (ii) are
in respect of trail compensation payable to Producer under the
Hartford Selling Agreement. MassMutual or Distributors, as applicable,
will pay Producer as full compensation for all services rendered by
Producer under this Agreement, commissions and/or service fees in the
amounts provided for under the Hartford Selling Agreement with respect
to the Products immediately prior to the Closing Date or as otherwise
agreed by MassMutual in writing. With respect to the Funds, (i)
Producer shall waive payment of any such compensation until
Distributors is in receipt of any fees due from the Funds with respect
to such services and (ii) the liability of Distributors and MassMutual
for any compensation payable is limited solely to the proceeds of the
compensation received by Distributors from the Funds.
If Producer has entered into a selling group agreement or similar
agreement (the "Other Agreement") with the respective distributor for
any Funds, Producer's right to compensation under this Agreement shall
be limited to sales of shares, interests or units of Funds and related
services to Plans using the Mutual Fund Platform;
7
any other sales or servicing of shares, interest or units of Funds by
Producer to customers other than Plans shall be subject to and
governed by the Other Agreement.
In addition to any changes permitted by section 7.4 hereof, MassMutual
may change the commission schedules incorporated by reference into
this Agreement or the compensation otherwise applicable to new sales
of Products by Producer at any time. No such change shall affect
first-year commissions on any contracts issued as a result of
applications received by MassMutual prior to the effective date of
such change.
Distributors agrees to identify to Producer, for each such payment,
the name of the representative of Producer who solicited the sale
resulting in the payment. Distributors will not compensate Producer
for any Product which is tendered for redemption after acceptance of
the application. Any chargebacks will be assessed against the Producer
of record at the time of the redemption.
Distributors will only compensate Producer as outlined below, for
those applications accepted by MassMutual, or by Hartford under the
Hartford Selling Agreement with respect to sales of a Product on or
before the Closing Date, and only after receipt of the required
premium or other deposits by MassMutual.
No compensation is payable on the purchase payments or transferred
assets applied to a Product where such purchase payments or
transferred assets are derived from the transfer, exchange or
termination of another Product or a product made available by
MassMutual.
5.2 COMPENSATION PAYABLE TO AFFILIATES.
If Producer is a Broker-Dealer unable to comply with state licensing
requirements because of a legal impediment which prohibits a
non-domiciliary corporation from becoming a licensed insurance agency
or prohibits non-resident ownership of a licensed insurance agency,
Distributors agrees to pay compensation to Producer's contractually
affiliated insurance agency, a wholly-owned agency affiliate of
Producer, or a representative or principal of Producer who is properly
state licensed and/or appointed. As appropriate, any reference in this
Agreement to Producer shall apply equally to such affiliate.
Distributors agrees to pay compensation to such an affiliate subject
to such affiliate's agreement to comply with the requirements of
EXHIBIT A attached hereto. All other obligations of Producer continue
to apply.
6. TERMINATION
6.1 This Agreement may be terminated by MassMutual, Distributors or
Producer by giving sixty (60) days' notice in writing to the other parties.
6.2 Such notice of termination shall be sent by registered mail to the
last known address of Producer appearing on MassMutual's records, or in the
event of
8
termination by Producer, to Massachusetts Mutual Life Insurance
Company, 1295 State Street, Springfield, Massachusetts 01111,
attention: Retirement Services Chief Compliance Officer.
6.3 Such notice shall be an effective notice of termination of this
Agreement as of the time the notice is deposited in the U.S. mail or the
time of actual receipt of such notice if delivered by means other than
mail.
6.4 This Agreement shall automatically terminate without notice upon the
occurrence of any of the events set forth below:
6.4.1 Upon the bankruptcy or dissolution of Producer.
6.4.2 When and if Producer commits fraud or gross negligence in the
performance of any duties imposed upon Producer by this Agreement or
wrongfully withholds or misappropriates, for Producer's own use, funds
of MassMutual, its policyholders or applicants.
6.4.3 When and if Producer materially breaches this Agreement or
materially violates any applicable state or federal law and/or
administrative regulation in a jurisdiction where Producer transacts
business.
6.4.4 When and if Producer fails to obtain renewal of a necessary
license in any jurisdiction, but only as to that jurisdiction and only
until Producer renews its license in such jurisdiction.
6.5 The parties agree that on termination of this Agreement, any
outstanding indebtedness to MassMutual or Distributors shall become
immediately due and payable.
7. GENERAL PROVISIONS
7.1 COMPLAINTS AND INVESTIGATIONS.
Producer shall cooperate with MassMutual in the investigation and
settlement of all complaints or claims against Producer and/or
MassMutual or Distributors relating to the solicitation or sale of the
Products under this Agreement. Producer, Distributors and MassMutual
each shall promptly forward to the others any complaint, notice of
claim or other relevant information which may come into its
possession. Producer, Distributors and MassMutual agree to cooperate
fully in any investigation or proceeding in order to attempt to
achieve a prompt and equitable resolution to all complaints or claims
and to ensure that Producer's, Distributors and MassMutual's
procedures with respect to related solicitation or servicing are
consistent with any applicable law or regulation.
In the event any legal process or notice is served on Producer in a
suit or proceeding against Distributors or MassMutual, Producer shall
forward forthwith such process or notice to MassMutual at its Home
Office in Springfield,
9
Massachusetts, attention; Retirement Services Chief Compliance
Officer, by registered mail.
7.2 WAIVER.
The failure of Distributors or MassMutual, to enforce any provisions
of this Agreement shall not constitute a waiver of any such provision.
The past waiver of a provision by Distributors or MassMutual shall not
constitute a course of conduct or a waiver in the future of that same
provision.
7.3 INDEMNIFICATION.
7.3.1 Indemnity Definitions. The following definitions shall apply
for purposes of this Section 7:
"Claim" means any civil, administrative and/or criminal action,
claim, suit, and/or legal proceeding of any kind that is brought
against an Indemnitee by a third party (the "Claimant")
unaffiliated with such Indemnitee.
"Costs" means any damages, settlements, judgments, losses,
expenses interest, penalties, reasonable legal fees and
disbursements (including without limitation fees and costs for
investigators, expert witnesses and other litigation advisors)
and other costs incurred by an Indemnitee to investigate, defend
or settle a Claim, except that no settlement payments shall be
included in Costs unless the applicable Indemnitor has given its
prior express written consent to the settlement, which consent
shall not be unreasonably withheld. Costs shall not include any
expenses for any investigation or defense of a Claim incurred by
Indemnitee after the date on which Indemnitor gives notice of its
election to assume the defense of such Claim.
7.3.2 Parties Liability.
(i) Producer and its affiliates shall indemnify and hold
Distributors and MassMutual, and each of their respective
directors, officers, and employees, harmless from any Costs
sustained by MassMutual and/or the Distributors (including
reasonable attorneys' fees) on account of any Claim, arising
out of, based upon, or otherwise relating to: (a) any breach
of any representation, warranty, covenant, agreement or other
obligation of Producer or any affiliate contained in this
Agreement; (b) a violation of state and/or federal laws,
regulations or rules, or the rules and regulations of any
applicable self-regulatory organizations by Producer or any
affiliate; (c) negligent, fraudulent, illegal or wrongful
action or inaction by Producer or any affiliate or by persons
employed or appointed by Producer. In any of the foregoing
cases Producer or any affiliate shall be an "Indemnitor" as
such term is used in this
10
Agreement and each of the Distributors and MassMutual, and
each of their directors, officers and employees, as
applicable, shall be an "Indemnitee" as such term is used in
this Agreement.
(ii) Distributors shall indemnify and hold Producer, and its
directors, officers, and employees, harmless from any Costs
sustained by Producer (including reasonable attorneys' fees)
on account of, arising out of, based upon, or otherwise
relating to: (a) any breach of any representation, warranty,
covenant, agreement or other obligation of Distributors
contained in this Agreement; (b) a violation of state and/or
federal laws, regulations or rules, or the rules and
regulations of any applicable self-regulatory organizations
by Distributors; (c) negligent, fraudulent, illegal or
wrongful action or inaction by Distributors or by persons
employed or appointed by Distributors other than Producer or
its employees or appointees. In any of the foregoing cases
Distributors shall be an "Indemnitor" as such term is used in
this Agreement and Producer, and each of its directors,
officers and employees, as applicable, shall be an
"Indemnitee" as such term is used in this Agreement.
(iii) MassMutual shall indemnify and hold Producer, and its
directors, officers, and employees, harmless from any Costs
sustained by Producer (including reasonable attorneys' fees)
on account of, arising out of any claim, based upon, or
otherwise relating to: (a) any breach of any representation,
warranty, covenant, agreement or other obligation of
MassMutual contained in this Agreement; (b) a violation of
state and/or federal securities or insurance laws,
regulations or rules, or the rules and regulations of any
applicable self-regulatory organizations by MassMutual; (c)
negligent, fraudulent, illegal or wrongful action or
inaction by MassMutual or by persons employed or appointed
by MassMutual other than Producer or its employees or
appointees. In any of the foregoing cases MassMutual shall
be an "Indemnitor" as such term is used in this Agreement
and Producer, and each of its directors, officers and
employees, as applicable, shall be an "Indemnitee" as such
term is used in this Agreement. Nothing contained herein
shall be deemed to protect Producer against any liability to
Distributors, the Funds or the Funds' shareholders to which
Producer would otherwise be subject by reason of negligence,
willful misfeasance, or bad faith in the performance of its
duties hereunder, or by reason of its reckless disregard of
its obligations and duties hereunder.
7.4 AMENDMENT AND ASSIGNMENT.
No assignment of this Agreement, or commissions payable hereunder,
shall be valid unless authorized in writing by each of the
non-assigning parties. Every
11
assignment shall be subject to any applicable state insurance
regulations pertaining to such assignments. The foregoing provisions
of this Section 7.4 notwithstanding, each of MassMutual and
Distributors may amend this Agreement, or assign this Agreement or any
of its rights and obligations hereunder, in whole or in part, at any
time or from time to time, including without limitation, to add or
delete products available for sale or change the compensation payable
on new sales at any time.
7.5 OFFSET.
Producer expressly authorizes MassMutual and Distributors to deduct,
from any monies due under this Agreement, every indebtedness or
obligation of Producer to MassMutual or Distributors or to any of
their affiliates under this agreement.
7.6 CONFIDENTIALITY.
MassMutual, Distributors and Producer agree that all facts or
information received by any party related to a contract owner shall
remain confidential, unless such facts or information is required to
be disclosed by any regulatory authority or court of competent
jurisdiction.
For purposes of this Agreement, Personal Information means financial
and medical information that identifies an individual personally and
is not available to the public, including, but not limited to, credit
history, income, financial benefits, policy or claim information and
medical records.
All parties agree to use and disclose Personal Information only to
carry out the purposes for which it was disclosed to them and will not
use or disclose Personal Information if prohibited by applicable law,
including, without limitation, statutes and regulations enacted
pursuant to the Gramm-Leach-Bliley Act (Public Law 106-102). If any
party hereto outsources services to a third party, such third party
will agree in writing to maintain the security and confidentiality of
any information shared with them.
7.7 PRIOR AGREEMENTS.
This Agreement terminates all previous agreements, if any, between
MassMutual, Distributors and Producer with respect to the Products.
However, the execution of this Agreement shall not affect any
obligations which have already accrued under any prior agreement
between the parties.
7.8 CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
12
By executing this Agreement, Producer acknowledges that it has read this
Agreement in its entirety and is in agreement with the terms and conditions
outlining the rights of Distributors, MassMutual and Producer under this
Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to be
effective as set forth above, upon the effective date below.
Massachusetts Mutual Life Insurance Company
By:
--------------------------------------
Title:
--------------------------------------
MML Distributors, LLC
By:
--------------------------------------
Title:
--------------------------------------
Broker-Dealer:
------------------------------
By:
---------------------------------
Print Name:
---------------------------------
Title:
---------------------------------
Insurance Agency:
---------------------------
By:
---------------------------------
Print Name:
---------------------------------
Title:
---------------------------------
Include additional Producers with signatures as necessary below.
MassMutual Financial Group is a marketing designation (or fleet name) for
Massachusetts Mutual Life Insurance company (MassMutual) and its affiliates.
Springfield, MA 01111-0001.
13
[LOGO]
MASSMUTUAL
FINANCIAL GROUP(SM)
EXHIBIT A
In accordance with the Selling Agreement, no compensation is payable unless
Producer and registered representatives have first complied with all applicable
state insurance laws, rules and regulations. MassMutual is required by the
Insurance Departments in all 50 states to pay compensation only to individuals
and entities that are properly insurance licensed and, in some states,
appointed. For registered Products, Distributors must also comply with FINRA
regulations that require Distributors to pay compensation to a FINRA registered
broker-dealer. Distributors must comply with both state and FINRA requirements.
Distributors requires confirmation that Producer holds current state insurance
licenses or markets insurance products through a contractual affiliate or
wholly-owned agency, which is properly insurance licensed and, if applicable,
appointed. If Producer is properly state licensed then compensation must be paid
to Producer in compliance with both state and FINRA requirements.
If Producer is not state insurance licensed and relies on the licensing of a
contractual affiliate or wholly-owned agency, the SEC has issued a number of
letters indicating that, under specific limited circumstances, it will take "no
action" against insurers (Distributors) paying compensation on registered
products to Producer's contractual affiliate or wholly-owned agency. At the
request of Producer, Distributors will provide copies of several of these
letters as well as a summary of their requirements.
If Producer intends to rely on one of these "no-action" letters, legal counsel
for Producer must confirm to Distributors in writing that all of the
circumstances of any one of the SEC no-action letters are applicable,
specifically including the jurisdictions for which Producer does not hold
current state insurance licenses. Producer's counsel must summarize each point
upon which the no-action relief was granted and represent that Producer's method
of operation is identical or meets the same criteria.
In addition to a letter from Producer's counsel, copies of the following
documentation are required:
- insurance licenses for all states in which Producer holds these
licenses and intends to operate and/or;
- insurance licenses for any contractual affiliate or wholly-owned
agency; and
- the SEC No-Action Letter that will be relied upon.
MassMutual Financial Group is a marketing designation (or fleet name) for
Massachusetts Mutual Life Insurance company (MassMutual) and its affiliates.
Springfield, MA 01111-0001.
EX-99.4
5
a13-1951_1ex99d4.txt
EX-99.4
EXECUTION COPY
REINSURANCE AGREEMENT
BETWEEN
HARTFORD LIFE INSURANCE COMPANY,
AND
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
DATED AS OF: JANUARY 1, 2013
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
Article I DEFINITIONS 1
Section 1.1 Definitions 1
Article II BASIS OF REINSURANCE AND BUSINESS REINSURED 12
Section 2.1 Reinsurance 12
Section 2.2 Separate Accounts 13
Section 2.3 Non-Guaranteed Elements 13
Section 2.4 Reserves and Liabilities Reporting 13
Section 2.5 Insurance Contract Changes 13
Section 2.6 Follow the Fortunes 15
Article III TRANSFER OF ASSETS; PAYMENTS; SETTLEMENTS;
ADMINISTRATION AND ACCOUNTING 16
Section 3.1 Payments by the Ceding Company 16
Section 3.2 Assignment of Recoverables 18
Section 3.3 Payments by the Reinsurer 19
Section 3.4 Net Settlement 19
Section 3.5 Delayed Payments 20
Section 3.6 Offset and Recoupment Rights 20
Section 3.7 Administration and Accounting 20
Section 3.8 Certain Reports 20
Article IV LICENSES; REINSURANCE CREDIT 22
Section 4.1 Licenses 22
Section 4.2 Security 22
Section 4.3 Trust Account and Settlements 24
Section 4.4 Valuation Method and Investment of Trust Assets 25
Section 4.5 Deposit of Assets 25
Section 4.6 Adjustment of Security and Withdrawals 25
Section 4.7 Valuation of Assets 27
Section 4.8 Reserve Credit 28
Section 4.9 Actions Following Reinvestment Event,
Triggering Event or Reserve Credit Event 29
Section 4.10 Trust Withdrawal Event 30
Section 4.11 Cure of Triggering Event or Reserve Credit Event 30
Article V OVERSIGHTS; COOPERATION; REGULATORY MATTERS 31
Section 5.1 Oversights 31
Section 5.2 Cooperation 31
Section 5.3 Regulatory Matters 31
Article VI INSOLVENCY 31
Section 6.1 Insolvency of the Ceding Company 31
i
PAGE
--------------------------------------------------------------------------------
Article VII DURATION; RECAPTURE 34
Section 7.1 Duration 34
Section 7.2 Survival 34
Section 7.3 Recapture 34
Section 7.4 Recapture Payments 35
Article VIII INDEMNIFICATION; DISCLAIMER 35
Section 8.1 Reinsurer's Obligation to Indemnify 35
Section 8.2 Ceding Company's Obligation to Indemnify 35
Section 8.3 Notice of Claim; Defense 36
Section 8.4 No Duplication; Exclusive Remedy 37
Section 8.5 Limitation on Set-off 38
Section 8.6 Recovery by Indemnified Party 38
Section 8.7 Right to Indemnification 38
Section 8.8 Cost of Enforcement 39
Section 8.9 Waiver of Duty of Utmost Good Faith 39
Article IX MISCELLANEOUS 39
Section 9.1 Remedies 39
Section 9.2 Governing Law 39
Section 9.3 Jurisdiction; Venue 40
Section 9.4 Jury Waiver 40
Section 9.5 Notices 40
Section 9.6 Successors and Assigns; No Third-Party Beneficiaries 42
Section 9.7 Entire Agreement; Amendments 42
Section 9.8 Interpretation 42
Section 9.9 Waivers 44
Section 9.10 Expenses 44
Section 9.11 Partial Invalidity 44
Section 9.12 Execution in Counterparts 45
Section 9.13 Treatment of Confidential Information 45
SCHEDULES:
SCHEDULE 1.1(a) Covered Insurance Policies
SCHEDULE 1.1(b) Separate Accounts
EXHIBITS:
EXHIBIT A Form of Trust Agreement
EXHIBIT B-1 Form of General Account Settlement Statement
EXHIBIT B-2 Form of Separate Account Settlement Statement
EXHIBIT C Investment Guidelines
EXHIBIT D Termination Settlement under Section 7.4
EXHIBIT E Form of Trust Withdrawal Event Notice
EXHIBIT F Form of Trust Withdrawal Event Acknowledgment
EXHIBIT G Form of Cure Notice
EXHIBIT H Form of Cure Acknowledgment
EXHIBIT I Schedule of Plan Administrative Service Agreements
ii
REINSURANCE AGREEMENT
THIS REINSURANCE AGREEMENT (this "Agreement"), is made and entered into on
January 1, 2013 and effective as of the Effective Time by and between HARTFORD
LIFE INSURANCE COMPANY, a life insurance company domiciled in the State of
Connecticut (the "Ceding Company") and MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY, a mutual life insurance company domiciled in the Commonwealth of
Massachusetts ("Buyer" or 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 Buyer has agreed to
purchase, the Business and certain assets of Hartford Life, Inc. and its
Affiliates pursuant to a Purchase and Sale Agreement, dated as of September 4,
2012 (the "Purchase Agreement");
WHEREAS, as contemplated by the Purchase Agreement, the Ceding Company wishes to
cede to the Reinsurer, and the Reinsurer wishes to reinsure, on a one hundred
percent (100%) indemnity reinsurance basis, on the terms and conditions set
forth herein, certain liabilities in respect of the Covered Insurance Policies
(as hereinafter defined);
WHEREAS, in connection with the Closing, the Ceding Company and the Reinsurer
have entered into the Trust Agreement, pursuant to which the trustee thereunder
shall hold assets as security for the satisfaction of the obligations of the
Reinsurer to the Ceding Company under this Agreement; and
WHEREAS, simultaneously with their entry into this Agreement on the date hereof,
the Ceding Company and the Reinsurer are entering into, among other agreements,
(i) the Administrative Services Agreement, pursuant to which the Reinsurer, in
its capacity as the Administrator, shall provide, or cause the provision of,
certain administrative services on behalf of the Ceding Company with respect to
the Covered Insurance Policies and the related Plan ASAs; and (ii) the
Transition Services Agreement, pursuant to which the Ceding Company and/or one
or more of its Affiliates shall provide or cause the provision of certain
transitional services to the Reinsurer and its Affiliates with respect to the
Business.
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:
1
"Accounting Period" means each calendar quarter during the term of this
Agreement or any fraction thereof ending on the Recapture Date or the date this
Agreement is otherwise terminated in accordance with Section 7.1, as applicable.
"Administrative Services Agreement" means that certain Administrative Services
Agreement dated as of the date hereof by and between the Ceding Company and the
Reinsurer.
"Administrator" has the meaning set forth in the Administrative Services
Agreement.
"Agreement" has the meaning set forth in the preamble.
"Assets" has the meaning set forth in the Trust Agreement.
"Assignment" has the meaning set forth in Section 3.2(a).
"Ceding Company" has the meaning set forth in the preamble.
"Ceding Company Extra Contractual Obligations" means all Liabilities and
obligations to any Person either existing as of the Effective Time or arising
out of or relating to events, acts or omissions occurring, or disclosures made,
prior to the Effective Time relating to the Business or the Covered Insurance
Policies (other than Liabilities or obligations arising under the express terms
and conditions, and within the limits, of the Covered Insurance Policies),
including any Liability for fines, penalties, Taxes, fees, forfeitures,
compensatory, punitive, exemplary, special, treble, bad faith, tort or any other
form of extra contractual damages, including all legal fees and expenses
relating thereto, which Liabilities or obligations arise from any act, error or
omission, whether intentional, negligent or in bad faith, arising out of (i) the
form, sale, marketing, 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, including any fines, penalties, Taxes, fees,
forfeitures, compensatory, punitive, exemplary, special, treble, bad faith, tort
or any other form of extra contractual damages, including all legal fees and
out-ofpocket expenses relating thereto related to escheat or unclaimed property
Liabilities to the extent that the Liability to pay amounts with respect to the
relevant Covered Insurance Policy to any Governmental Body relates to property
deemed abandoned (as determined pursuant to Applicable Law) prior to the
Effective Time. For the avoidance of doubt, (A) any Liabilities includable in
(iii) above which relate to any escheat or abandoned property audits or
examinations by a Governmental Body initiated prior to the Effective Time shall
be included within the definition of Ceding Company Extra Contractual
Obligations to the extent such audits or examinations relate to property deemed
abandoned (as determined pursuant to Applicable Law) prior to the Effective Time
and (B) any Liability to the extent arising out of or relating to events, acts
or omissions occurring, or disclosures made, on or following the Effective Time
in connection with the management, operation or conduct of the Business by the
Reinsurer and its Affiliates shall not be a Ceding Company Extra Contractual
Obligation, even if such event, act, omission or disclosure is consistent with
the practices and procedures followed by the Ceding Company and its Affiliates
prior to the Effective Time.
2
"Ceding Company Indemnified Parties" has the meaning set forth in Section 8.1.
"Claim Notice" has the meaning set forth in Section 8.3(a).
"Closing Date" means January 1, 2013.
"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 determined in accordance with the Applicable Law of the state of
domicile of the Reinsurer.
"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, or any
Plan sponsor in respect of, 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, 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 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, group annuity contracts, group funding
agreements, maturity funding contracts, contracts of insurance and supplementary
contracts issued or renewed by the Ceding Company in connection with the
Business set forth on Schedule 1.1(a); and (ii) the New Insurance Policies.
"Cure Acknowledgment" has the meaning set forth in Section 4.11.
"Cure Event" has the meaning set forth in Section 4.11.
"Cure Notice" has the meaning set forth in Section 4.11.
"Effective Time" means 12:00:01 a.m. (New York time) on January 1, 2013.
"Eligible Assets" has the meaning set forth in Section 4.4.
"Estimated Premium Increase" has the meaning set forth in Section 8.6(a).
3
"Excluded Liabilities" means the Liabilities that are not reinsured by Reinsurer
as Reinsured Liabilities, including the following liabilities and contractual
and other obligations of the Ceding Company and its Affiliates:
(i) Ceding Company Extra Contractual Obligations; and
(ii) any increased Liabilities of the Ceding Company under, arising out of or
relating to the Covered Insurance Policies, to the extent caused by (a) any
failure by the Ceding Company to implement or otherwise put into effect the
Reinsurer's recommendations with respect to Non-Guaranteed Elements in
accordance with Section 2.3, other than to the extent that following such
recommendation would have violated any Applicable Law, generally accepted and
applicable Actuarial Standards of Practice or the terms of any Covered Insurance
Policy, (b) an action or omission of the Ceding Company in breach of Section
2.5, (c) any action taken by the Ceding Company with respect to the Covered
Insurance Policies in breach of this Agreement or the Administrative Services
Agreement or (d) any action taken by the Ceding Company pursuant to Section 4.02
of the Administrative Services Agreement other than to the extent such action
was required by Applicable Law or the terms and conditions of the Covered
Insurance Policies.
"Fair Market Value" means the fair market value of such Asset as calculated by
the Reinsurer. In providing this calculation, the Reinsurer shall use prices
published by a nationally recognized pricing service for assets for which such
prices are available, and for assets for which such prices are not available,
the Reinsurer shall use methodologies consistent with those which it uses for
determining the fair market value of assets held in its own general account
(other than the Assets) in the ordinary course of business.
"General Account Liabilities" means:
(i) all gross Liabilities, obligations and expenses arising under the Covered
Insurance Policies, other than the Separate Account Liabilities, including:
(a) all Liabilities resulting under the terms and conditions of the Covered
Insurance Policies for claims and benefits (including 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), claim expenses, interest on claims
or unearned premiums, withdrawals, surrenders, amounts payable for returns or
refunds of premiums, guaranteed minimum death benefits, including any payments
of any of the above to any Governmental Body whether for tax withholding,
escheat, unclaimed property or otherwise;
(b) all Liabilities arising out of any changes to the terms and conditions of
the Covered Insurance Policies mandated by Applicable Law or initiated by the
applicable Plan sponsor or Plan participant pursuant to the terms of the
applicable Covered Insurance Policy; and
(c) all Liabilities that relate to any amounts held in the general account of
the Ceding Company pending transfer to the Separate Accounts; and
4
(ii) the following Liabilities, obligations, expenses and Premium taxes:
(a) taxes due in respect of Premiums received or accrued by the Ceding Company
(other than such taxes for which the Ceding Company is liable under the Purchase
Agreement); provided that, for the avoidance of doubt, the amount of any such
Premium taxes shall be determined without regard to any credits, deductions or
offsets to such Premium taxes available to the Ceding Company;
(b) Fees and other amounts payable by the Ceding Company in respect of the
Covered Insurance Policies and Plan ASAs;
(c) Compensation and other servicing and administration fees relating to the
Covered Insurance Policies payable by the Ceding Company or HSD to or for the
benefit of the Distributors; and
(d) all Reinsurer Extra Contractual Obligations; and
(iii) the following Liabilities, obligations, excise taxes and expenses:
(a) assessments and similar charges in connection with participation by either
Ceding Company or Reinsurer, whether voluntary or involuntary, in any guaranty
association established or governed by any Governmental Body to the extent
related to Premiums earned on or after the Effective Time after taking into
consideration any credits, deductions or offsets available to the Ceding Company
relative to such assessments and charges;
(b) all Liabilities to the extent relating to acts, errors or omissions
occurring on or after the Effective Time that relate to 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; and
(c) all excise taxes imposed with respect to the administration of the Covered
Insurance Policies on or after the Effective Time.
"General Account Reserves" means the aggregate amount of general account
reserves, deposits, due and unpaid amounts and incurred but not reported
liabilities, in each case with respect to the Covered Insurance Policies,
calculated consistent with the reserve requirements, statutory accounting rules
and actuarial principles applicable to the Ceding Company under Applicable Law;
provided, the term "General Account Reserves" does not include the Separate
Account Reserves.
"General Account Settlement Statement" has the meaning set forth in Section
3.4(a).
5
"Indemnified Party" has the meaning set forth in Section 8.3(a).
"Indemnifying Party" has the meaning set forth in Section 8.3(a).
"Intercompany Services Agreement" has the meaning set forth in Section 3.1(d).
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Net Settlement" has the meaning set forth in Section 3.4(a).
"New Insurance Policies" means the binders, endorsements, riders, policies,
certificates, group annuity contracts, group funding agreements, maturity
funding contracts and contracts of insurance and supplementary contracts issued
by the Administrator in the name of the Ceding Company following the Closing
Date in accordance with the Administrative Services Agreement.
"Non-Guaranteed Elements" has the meaning 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.
"Party" has the meaning set forth in the preamble.
"Payee" has the meaning set forth in Section 6.1(a).
"Plan ASA" means each administrative services agreement between the Ceding
Company and any Plan sponsor related to a Covered Insurance Policy. A list of
all Plan ASAs is attached hereto as Exhibit I.
"Premiums" means premiums, considerations, deposits, loan repayments and other
receipts received in respect of the Covered Insurance Policies, including any
amounts received under any Plan ASA.
"Purchase Agreement" has the meaning set forth in the recitals.
"RBC Ratio" means, with respect to the Reinsurer, 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)
sixty (60) calendar days after the end of each calendar year, or (ii) forty-five
(45) 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 7.3(a).
"Recapture Triggering Event" means either of the following occurrences:
(a) the Reinsurer becomes insolvent or is placed into liquidation,
rehabilitation, conservation, supervision, receivership or similar proceedings
(whether voluntary or involuntary), or there is instituted against it
proceedings for the appointment of a receiver, liquidator, rehabilitator,
6
conservator, or trustee in bankruptcy, or other agent known by whatever name, to
take possession of its assets or assume control of its operations; or
(b) the Reinsurer's RBC Ratio as of any quarter-end falls below 175%, 150%,
125%, 100%, 75%, 50%, 25% or 0% and the Reinsurer has not cured such shortfall
as of the applicable RBC Reporting Deadline to the lowest incremental percentage
listed above that the Reinsurer's RBC Ratio exceeded as of the immediately
preceding RBC Reporting Deadline; provided, that in the event there is 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 of and methodologies contained in such calculation, the Parties shall
amend this Agreement to incorporate an alternate 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 thirty
(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
its RBC Ratio as if such material change had not occurred.
7
"Recoverables" has the meaning set forth in Section 3.1(b).
"Reinsured Liabilities" means the General Account Liabilities and the Separate
Account Liabilities; provided that in no event shall any Excluded Liability be a
Reinsured Liability.
"Reinsurer" has the meaning set forth in the preamble.
"Reinsurer Extra Contractual Obligations" means all Liabilities and obligations
to any Person arising out of or relating to events, acts or omissions occurring,
or disclosures made, on or after the Effective Time relating to the Business or
the Covered Insurance Policies (other than Liabilities or obligations arising
under the express terms and conditions, and within the limits, of the Covered
Insurance Policies), including any Liability for fines, penalties, Taxes, fees,
forfeitures, compensatory, punitive, exemplary, special, treble, bad faith, tort
or any other form of extra contractual damages, including all legal fees and
expenses relating thereto, which Liabilities or obligations arise from any act,
error or omission, whether intentional, negligent or in bad faith, arising out
of (i) the form, sale, marketing, 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, including any fines, penalties,
Taxes, fees, forfeitures, compensatory, punitive, exemplary, special, treble,
bad faith, tort or any other form of extra contractual damages, including all
legal fees and out-of-pocket expenses relating thereto related to escheat or
unclaimed property Liabilities to the extent that the Liability to pay amounts
with respect to the relevant Covered Insurance Policy to any Governmental Body
relates to property deemed abandoned (as determined pursuant to Applicable Law)
on or after the Effective Time. For the avoidance of doubt, any Liability to the
extent arising out of or relating to events, acts or omissions occurring, or
disclosures made, on or following the Effective Time in connection with the
management, operation or conduct of the Business by the Reinsurer and its
Affiliates shall be a Reinsurer Extra Contractual Obligation, even if such
event, act, omission or disclosure is consistent with the practices and
procedures followed by the Ceding Company and its Affiliates prior to the
Effective Time.
8
"Reinsurer Indemnified Parties" has the meaning set forth in Section 8.2.
"Required Balance" means an amount equal to one hundred percent (100%) of the
General Account Reserves.
"Reinvestment Event" means any of the following occurrences at any time
following a Trust Withdrawal Event:
(a) the numerical value of the Required Balance exceeds $250,000,000;
(b) a Triggering Event; or
(c) a Reserve Credit Event.
"Reserve Credit" means full Statutory Financial Statement credit for the
reinsurance ceded to the Reinsurer with respect to the General Account
Liabilities under this Agreement in the Ceding Company's NAIC Annual Statement
Blank and in all Statutory Financial Statements of the Ceding Company required
to be filed with the Governmental Body charged with supervision of insurance
companies in the State of Connecticut.
"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 provided that such event has not been remedied prior to the last
calendar day of the calendar quarter in which such event occurs.
"S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial
Services LLC business, or any successor thereto.
"SAP" means the statutory accounting principles prescribed or permitted by the
insurance regulatory authorities of the State of Connecticut or other applicable
jurisdictions.
"Separate Account Liabilities" means all Liabilities, obligations, expenses and
Premium and excise taxes arising under 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 attributable to the Separate Account Liabilities,
calculated consistent with the reserve requirements, statutory accounting rules
and actuarial principles applicable to the Ceding Company under Applicable Law.
"Separate Account Settlement Statement" has the meaning set forth in Section
3.4(a).
9
"Separate Accounts" means the registered and unregistered separate accounts or
sub-accounts of the Ceding Company applicable to the Covered Insurance Policies
as identified in Schedule 1.1(b) hereto.
"Statutory Book Value" shall mean, 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 prescribed or permitted practices applicable to the Reinsurer.
"Statutory Financial Statements" means, with respect to any Party, the annual
and quarterly statutory financial statements of such Party filed with the
Governmental Body charged with supervision of insurance companies in the
jurisdiction of domicile of such Party to the extent such Party is required by
Applicable Law to prepare and file such financial statements.
"Terminal Accounting Period" means the Accounting Period during which the
Recapture Date occurs.
"Terminal Settlement" has the meaning set forth in Section 7.4.
"Terminal Settlement Statement" has the meaning set forth in Section 7.4.
"Third Party Appraiser" means a nationally recognized independent appraisal firm
which is mutually acceptable to the Reinsurer and the Ceding Company or, if the
Reinsurer and the Ceding Company are unable to agree on such an appraisal firm,
an independent appraisal firm selected by mutual agreement of the Reinsurer's
and the Ceding Company's independent accountants.
"Third-Party Claim" has the meaning set forth in Section 8.3(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" means either of the following occurrences:
(a) the Reinsurer's RBC Ratio falls below 300% as of a quarter-end and the
Reinsurer has not cured such shortfall as of the applicable RBC Reporting
Deadline; provided, that in the event there is 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 of and methodologies contained
in such calculation, the Parties shall amend this Agreement to incorporate an
alternate 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 thirty (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 its RBC Ratio as if such
material change had not occurred; or
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(b) at any time following a Trust Withdrawal Event, the financial strength
rating of the Reinsurer falls below "BBB" as rated by S&P and "Baa2" as rated by
Moody's.
11
"Trust Account" means the reserve trust account established by the Reinsurer and
the Ceding Company for the benefit of the Ceding Company under the Trust
Agreement.
"Trust Agreement" means that certain Trust Agreement dated as of December 31,
2012 by and among the Reinsurer, the Ceding Company and Citibank N.A., as
trustee, substantially in the form of Exhibit A hereof.
"Trust Withdrawal Event" has the meaning set forth in Section 4.10.
"Trust Withdrawal Event Conditions" means:
(a) the financial strength rating of the Reinsurer is "BBB" or higher as rated
by S&P and "Baa2" or higher as rated by Moody's;
(b) the Reinsurer's RBC Ratio is greater than or equal to 300% as of the
immediately preceding quarter-end;
(c) the numerical value of the Required Balance is less than $250,000,000; and
(d) no Reserve Credit Event has occurred and is continuing.
"Trust Withdrawal Event Acknowledgment" has the meaning set forth in Section
4.10.
"Trust Withdrawal Event Notice" has the meaning set forth in Section 4.10.
ARTICLE II
BASIS OF REINSURANCE AND BUSINESS REINSURED
SECTION 2.1 REINSURANCE. 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 the General
Account Liabilities on a coinsurance basis and one hundred percent (100%) of the
Separate Account Liabilities on a modified coinsurance basis. 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, in
accordance with the terms of this Agreement, the Reinsurer shall be obligated to
make payments to or on behalf of the Ceding Company, as and when due, of all
General Account Liabilities.
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SECTION 2.2 SEPARATE ACCOUNTS.
(a) For each of the Separate Accounts applicable to Covered Insurance Policies,
the amount to be invested in accordance with the terms of such Covered Insurance
Policy shall be held by the Ceding Company 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. From and after the Effective Time, subject to the rights of
the Reinsurer as the Administrator, the Ceding Company shall retain, control and
own all assets contained in the Ceding Company's Separate Accounts and shall
hold the 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.
(b) For each of the Separate Accounts applicable to Covered Insurance Policies,
the amount to be paid with respect to surrenders, loans, annuitization payments,
death benefits or any other amounts payable under such Covered Insurance Policy
shall be paid out of the Separate Accounts to the extent required by such
Covered Insurance Policy. Any amounts required to be paid from assets of any
Separate Accounts pursuant to the terms of a Covered Insurance Policy shall be
paid from the relevant Separate Account and the Reinsurer shall not be required
to pay any such amounts out of its own general account. 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 terms and conditions of the
applicable Covered Insurance Policies.
SECTION 2.3 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, generally accepted and applicable Actuarial Standards of
Practice or the terms of any Covered Insurance Policy.
SECTION 2.4 RESERVES AND LIABILITIES REPORTING. Pursuant to the Administrative
Services Agreement and in accordance with the terms thereof, the Reinsurer
acting in its capacity as Administrator thereunder shall provide to the Ceding
Company information relating to the reserves and liabilities in respect of the
Covered Insurance Policies.
SECTION 2.5 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 Reinsurer's 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. Furthermore, the Ceding Company shall not object to or hinder
any efforts by the Reinsurer to effectuate any changes to any Covered Insurance
Policy, including increases to any fees or charges thereunder, as long as such
changes are not contrary to the terms and conditions of such Covered Insurance
Policy or this Agreement or in violation of any Applicable Law or Governmental
Order. 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
acting in its capacity as Administrator or at the direction of the Reinsurer, or
(b) pursuant to the terms of any Covered Insurance Policies or
13
required by 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. With respect to any change that, despite
being required by the terms of any Covered Insurance Policies, any Governmental
Body or Applicable Law, the Administrator 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 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
14
VIII. Likewise, in the event the Ceding Company refuses to comply with any
request by the Reinsurer or the Administrator to implement a change or hinders
Reinsurer's or Administrator's efforts to implement a change and such change is
not contrary to the terms and conditions of the applicable Covered Insurance
Policy or this Agreement or in violation of any Applicable Law or Governmental
Order, the Ceding Company shall indemnify and hold the Reinsurer harmless for
any Loss so suffered by the Reinsurer in accordance with Article VIII.
SECTION 2.6 FOLLOW THE FORTUNES. Subject to the terms and conditions hereof, 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 on or after the Effective
Time.
15
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 will transfer, on or prior to the
Closing Date, in accordance with the mechanics set forth in the Purchase
Agreement and in the Trust Agreement, to the Trust Account, Eligible Assets with
a Fair Market Value equal to the Net Transfer Amount. Such payment shall be
adjusted following the date hereof in accordance with the mechanics set forth
therefor in the Purchase Agreement.
(b) As additional consideration for the reinsurance provided herein, the
Reinsurer shall be entitled to one hundred percent (100%) of all of the
following amounts actually received by the Ceding Company, HSD or the Reinsurer,
whether in its role as reinsurer hereunder or as Administrator, with respect to
the Covered Insurance Policies that are either due and unpaid as of the
Effective Time or that arise on any date after the Effective Time (items (i)
through (v) below, collectively, the "Recoverables"):
(i) Premiums;
(ii) Litigation recoveries to the extent such recoveries relate to Reinsured
Liabilities;
(iii) Without duplication, all charges and fees, including per participant fees,
management fees, marketing fees, 12b-1 fees, 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 made to the Ceding Company or its Affiliates
by any mutual fund organization or other third party attributable to the use of
such organization's mutual funds as funding vehicles to the extent related to
the Covered Insurance Policies;
(iv) Without duplication, all other payments, collections, fees, credits,
releases of funds to the Ceding Company from any Separate Accounts established
by the Ceding Company and any and all recoveries relating to the Reinsured
Liabilities or the Covered Insurance Policies; and
(v) Any investment income actually received by HLIC or HSD relating to items (i)
through (iv) above.
Actual, direct receipt by the Reinsurer, including in its role as Administrator
under the Administrative Services Agreement, 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.
(c) The Ceding Company hereby appoints the Reinsurer as its agent and
attorney-in-fact to collect all Recoverables in the Ceding Company's name. 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 all 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 Reinsurer shall be responsible for
and has hereby assumed the financial risk of any uncollected or uncollectible
Recoverables. To the extent that the Ceding Company recovers any Recoverables
from any third party attributable to the Covered Insurance Policies, the Ceding
Company shall promptly (but no later than within ten (10) Business Days)
transfer such amounts to the Reinsurer, together with any pertinent information
that the Ceding Company may have relating thereto.
16
(d) If during the term of this Agreement (i) that certain Intercompany Services
Agreement dated as of the date hereof between the Ceding Company and HSD (the
"Intercompany Agreement") is terminated, amended, modified, supplemented or
altered in any way without the prior written consent of the Reinsurer, or (ii)
HSD is unable to pay, receive and/or share any amount payable to the Ceding
Company, or otherwise fails to perform its obligations, under the Intercompany
Agreement, because it ceases to hold or maintain its FINRA membership or any
Governmental Permit or for any other reason, then the Reinsurer and the Ceding
Company shall enter into new contractual arrangements to give effect to the
transactions contemplated by the Intercompany Agreement and this Agreement,
including Section 3.1(b)(iii) hereof and to assure that HLIC's contractual
obligations are met. Such arrangements may include the appointment of an
Affiliate of Buyer as HLIC's agent or designee to receive compensation payable
by mutual fund organizations and an assignment of HSD's rights and obligations
under agreements with mutual fund organizations to such Affiliate of Buyer for
no additional consideration.
17
SECTION 3.2 ASSIGNMENT OF RECOVERABLES.
(a) The Ceding Company hereby assigns, transfers and conveys to the Reinsurer
and its successors and permitted assigns all of the Ceding Company's right,
title and interest in and to the Recoverables (the "Assignment"). The Reinsurer
hereby accepts the Assignment. The Reinsurer and the Ceding Company hereby agree
that, upon any recapture hereunder, all of the Reinsurer's right, title and
interest in and to the Recoverables shall be immediately assigned, transferred
and conveyed to the Ceding Company or its successors or permitted assigns. Each
Party, as reasonably requested by the other from time to time, shall take all
reasonably appropriate action and execute any reasonably necessary and
appropriate additional documents, instruments or conveyances of any kind which
may be reasonably necessary to carry out the provisions of this Section 3.2.
(b) The Parties intend that at all times prior to a recapture hereunder the
Reinsurer shall have a first priority, perfected security interest in the
Recoverables. The Ceding Company shall provide the Reinsurer with the requisite
power of attorney in order to allow the Reinsurer to execute and deliver UCC
financing statements with respect to any and all intangible assets assigned or
transferred to the Reinsurer hereunder that are deemed reasonably necessary by
the Reinsurer in order to perfect the security interest in the Recoverables. All
costs and expenses incurred in connection with obtaining a first priority
perfected security interest shall be paid by the Reinsurer.
(c) This Section 3.2 shall be binding upon each of the Ceding Company and the
Reinsurer and their successors and assigns and legal representatives. No right
or obligation
18
under this Section 3.2 may be directly or indirectly assigned or transferred by
any Party, in whole or in part, to any third party (other than to the Ceding
Company's successors and assigns), including any bankruptcy trustee, liquidator,
rehabilitator, receiver or conservator, by operation of law or otherwise,
whether voluntary or involuntary, without the prior written consent of the
Parties; provided, notwithstanding the foregoing or any other provision herein
to the contrary, the Reinsurer may assign its rights and obligations under this
Section 3.2 to an Affiliate
SECTION 3.3 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, the Ceding Commission in the manner
contemplated in Section 3.3(b) of the Purchase Agreement. In addition, the
Reinsurer shall pay and discharge all General Account Liabilities which are or
which become due and payable at or at any time after the Effective Time. For the
avoidance of doubt, the Reinsurer shall be required to pay and discharge the
Separate Account Liabilities entirely with funds from the Separate Accounts and
solely to the extent there are such funds available. Notwithstanding anything to
the contrary in this Agreement or the Purchase Agreement, the Parties hereby
acknowledge that no portion of the Ceding Commission is being allocated to the
Covered Insurance Policy, dated as of March 1, 1982, issued by the Ceding
Company to HFIC for the benefit of certain employees of Hartford Life, Inc. and
its Affiliates.
SECTION 3.4 NET SETTLEMENT.
(a) During the term of this Agreement, a settlement amount between the Ceding
Company and the Reinsurer for the Reinsured Liabilities as of the last day of
each Accounting Period (the "Net Settlement") shall be calculated by the
Reinsurer in accordance with (i) in the case of General Account Liabilities,
Exhibit B-1 hereto and (ii) in the case of Separate Account Liabilities, Exhibit
B-2 hereto, and separate statements setting forth details of such calculation
with respect to the General Account Liabilities (the "General Account Settlement
Statement") in the form as set forth in Exhibit B-1 hereto and the Separate
Account Liabilities (the "Separate Account Settlement Statement") in the form
set forth in Exhibit B-2 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 five (5) Business Days of
its receipt of the General Account Settlement Statement and the Separate Account
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 at the time it delivers the
General Account Settlement Statement and the Separate Account Settlement
Statement for such Accounting Period to the Ceding Company.
(b) To the extent that the Reinsurer makes any direct payments to or on behalf
of the Ceding Company in respect of Reinsured Liabilities in respect of an
Accounting Period prior to the Net Settlement process, whether in its capacity
as the Administrator or otherwise, the amount of any such payments shall be
excluded from the Net Settlement. In addition, to the extent the Reinsurer
receives any Recoverables in respect of an Accounting Period prior to the Net
Settlement process, whether in its capacity as the Administrator or otherwise,
the amount of any such Recoverables received shall be excluded from the Net
Settlement.
19
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 first
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 the Reinsurer hereunder unless the delayed
settlement thereof was caused by the Ceding Company.
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 insolvency, rehabilitation, conservatorship or comparable
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, the Reinsurer, in its capacity as
Administrator, will administer the Covered Insurance Policies and the related
Plan ASAs.
SECTION 3.8 CERTAIN REPORTS.
(a) At each RBC Reporting Deadline, the Reinsurer shall provide to the Ceding
Company: (i) if such RBC Reporting Deadline pertains to a calendar year end, its
calculation of the RBC Ratio of the Reinsurer as of the last day of such
calendar year and (ii) if such RBC Reporting Deadline pertains to a calendar
quarter other than the calendar quarter ending on December 31, confirmation
that, in the good faith estimate of the Reinsurer, the RBC Ratio of the
Reinsurer is equal to or greater than 375% as of the last day of such calendar
quarter. Without limitation upon the Reinsurer's obligations pursuant to the
foregoing, if at any time the RBC Ratio of the Reinsurer falls below 375%, then
at the next RBC Reporting Deadline and for successive RBC Reporting Deadlines
thereafter until the Reinsurer's RBC Ratio rises above 375%, the Reinsurer shall
provide to the Ceding Company: (i) if such RBC Reporting Deadline pertains to a
calendar year end, its calculation of the RBC Ratio of the Reinsurer as of the
last day of such calendar year and (ii) if such RBC Reporting Deadline pertains
to a calendar quarter other than the calendar quarter ending on December 31, a
good faith estimate of its calculation of the RBC Ratio of the Reinsurer as of
the last day of such calendar quarter. If such calculation of the RBC Ratio of
the Reinsurer would result in a Triggering Event or a Recapture Triggering Event
if not cured by the Reinsurer by the applicable RBC Reporting Deadline, and such
shortfall in the RBC Ratio is actually cured by the Reinsurer on or prior to
such RBC Reporting Deadline, then the Reinsurer shall provide to the Ceding
Company (i) a description of the manner in which such shortfall was cured and
(ii) an updated calculation of the RBC Ratio of the Reinsurer as of such RBC
Reporting Deadline.
(b) The Reinsurer shall provide written notice to the Ceding Company within two
(2) Business Days of (i) the occurrence of any Triggering Event or Recapture
Triggering Event and (ii) its calculation of the RBC Ratio which would result in
a Triggering Event or a Recapture Triggering Event (assuming such calculation
had been as of a quarter-end and not taking into account any applicable cure
period). 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
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determination of whether a Triggering Event or a Recapture Triggering Event has
occurred.
(c) Each Party shall provide the other with a copy of its annual and quarterly
Statutory Financial Statements and a copy of its annual audited Statutory
Financial Statements along with the audit report thereon.
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ARTICLE IV
LICENSES; REINSURANCE CREDIT
SECTION 4.1 LICENSES. At all times during the term of this Agreement, (i) the
Reinsurer shall hold and maintain all licenses and authorizations required under
Applicable Law to perform its obligations hereunder and (ii) the Ceding Company
shall hold and maintain all licenses and authorizations required under
Applicable Law to perform its obligations hereunder.
SECTION 4.2 SECURITY.
(a) In accordance with the Purchase Agreement and the Trust Agreement, the Trust
Account has been created with respect to the General Account Liabilities with a
trustee reasonably acceptable to the Ceding Company, naming the Ceding Company
as sole beneficiary thereof. In connection with the execution of this Agreement,
the Trust Account has been funded with Eligible Assets in accordance with
Section 3.3(b) of the Purchase Agreement. In accordance with the requirements of
the Trust Agreement and subject to Section 4.9 and Section 4.10, the Reinsurer
shall ensure that (i) at all times prior to the occurrence of a Triggering Event
or a Reserve Credit Event, in accordance with the terms set forth herein and in
the Trust Agreement, the Trust Account holds assets with a Statutory Book Value
equal to the Required Balance and (ii) at all times following the occurrence of
a Triggering Event or a Reserve Credit Event, in accordance with the Terms of
the Trust Agreement, the Trust Account holds assets with a Fair Market Value
equal to the Required Balance. All transfers to and withdrawals from the Trust
Account shall be in accordance with and subject to the requirements set forth in
the Trust Agreement.
(b) Prior to the occurrence of a Reserve Credit Event (but not a Triggering
Event), the Ceding Company and the Reinsurer agree that the assets maintained in
the Trust Account may be withdrawn by the Ceding Company only after a default by
the Reinsurer in the performance of its monetary obligations hereunder, upon
delivery by the Ceding Company to the Reinsurer of a written notice thereof, and
solely to the extent required to cure such default and, notwithstanding any
other provision of this Agreement, shall be utilized and applied by the Ceding
Company or any successor by operation of law, including any liquidator,
rehabilitator, receiver or conservator of the Ceding Company, only to pay
amounts then due to the Ceding Company under this Agreement with respect to the
General Account Liabilities. The amount of any such withdrawal in excess of
amounts then due to the Ceding Company hereunder shall be deemed maintained in
constructive trust for the benefit of the Reinsurer and promptly returned to the
Reinsurer. The Ceding Company and the Reinsurer further agree that prior to the
occurrence of a Triggering Event or a Reserve Credit Event, the Reinsurer,
acting as Administrator, shall have the right to withdraw all or any part of the
cash and assets maintained in the Trust Account in order to pay any General
Account Liabilities provided that the aggregate Statutory Book Value of the
assets maintained in the Trust Account as of any Accounting Period end is equal
to or greater than the Required Balance as of such Accounting Period end.
(c) Following the occurrence of a Reserve Credit Event (but not a Triggering
Event), the Ceding Company may withdraw the assets held in the Trust Account at
any time and from time to time, notwithstanding any other provisions of this
Agreement, and assets withdrawn from such Trust Account shall be utilized and
applied by the Ceding Company (or any successor by operation of law of the
Ceding Company, including any liquidator, rehabilitator, receiver or conservator
of the Ceding Company), without diminution because of insolvency on the part of
the Ceding Company or the Reinsurer; provided, however, that following any such
withdrawal the Ceding Company (or any successor by operation of law of the
Ceding Company) may only apply such assets for one or more of the following
purposes:
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(i) to pay, or reimburse the Ceding Company for payment of, Premiums received by
the Reinsurer hereunder which are to be returned to policyholders,
contractholders, Plan sponsors or Plan participants because of cancellations or
surrenders of Covered Insurance Policies reinsured hereunder;
(ii) to pay, or reimburse the Ceding Company for payment of, surrenders,
benefits, losses or other amounts payable pursuant to the provisions of the
Covered Insurance Policies reinsured hereunder or any other General Account
Liabilities;
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(iii) to pay to the Reinsurer amounts held in the Trust Account in excess of the
amount necessary to secure the Reserve Credit; or
(iv) where the Ceding Company has received notification of termination of the
Trust Account and where the Reinsurer's entire obligations under this Agreement
remain unliquidated and undischarged ten (10) days prior to the termination
date, to withdraw amounts equal to the amount of Reinsured Liabilities and
deposit those amounts in a separate account, in the name of the Ceding Company
in any qualified United States financial institution apart from its general
assets, in trust for the uses and purposes specified in subparagraphs (i) to
(iii) of this Section 4.2(c).
SECTION 4.3 TRUST ACCOUNT AND SETTLEMENTS. The trustee shall hold assets in the
Trust Account pursuant to the terms of the Trust Agreement. All settlements of
account under the Trust Agreement between the Ceding Company and the Reinsurer
shall be made in United States dollars in cash or its equivalent.
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SECTION 4.4 VALUATION METHOD AND INVESTMENT OF TRUST ASSETS.
(a) Prior to the occurrence of a Triggering Event or a Reserve Credit Event, the
assets held in the Trust Account shall be valued at their Statutory Book Value
as of the date as of which such assets are required to be valued.
(b) Following the occurrence of a Triggering Event or a Reserve Credit Event,
the assets held in the Trust Account shall be valued at their Fair Market Value
as of the date as of which such assets are required to be valued.
(c) The assets that may be held in the Trust Account shall consist of
investments of the type permitted by Connecticut Insurance Regulations Section
Section 38a-88-6 and 38a88-7 or any successor provision and all other Applicable
Laws that would govern the permitted assets for the Trust Account; provided,
that (i) each such investment that is a security is issued by an institution
that is not the Reinsurer, the Ceding Company or an Affiliate of either Party
and (ii) such investments comply with the requirements specified by the
investment guidelines as set forth on Exhibit C (the assets pursuant to this
sentence being the "Eligible Assets").
SECTION 4.5 DEPOSIT OF ASSETS. Prior to depositing assets in the Trust Account,
the Reinsurer will, at its option, do one of the following: (i) execute
assignments or endorsements in blank in favor of the trustee pursuant to the
Trust Agreement or (ii) transfer legal title to the trustee, in either case, of
all shares, obligations or any other assets requiring assignments, in order that
the Ceding Company, or the trustee upon the direction of the Ceding Company, may
whenever necessary negotiate these assets without the consent or signature from
the Reinsurer or any other entity.
SECTION 4.6 ADJUSTMENT OF SECURITY AND WITHDRAWALS. The amount of security
required to be provided by the Reinsurer shall be adjusted following the end of
each Accounting Period based on the Required Balance as of the end of such
Accounting Period (such amounts to be calculated by the Reinsurer and a report
thereof to be furnished to the Ceding Company no later than the twentieth (20th)
Business Day following the end of such Accounting Period) and the Statutory Book
Value or the Fair Market Value, as applicable, of Eligible Assets then in the
Trust Account and will be further adjusted as follows:
(a) Prior to the occurrence of a Triggering Event or a Reserve Credit Event:
(i) If the aggregate Statutory Book Value of the Eligible Assets held in the
Trust Account at the end of any Accounting Period is less than the Required
Balance, calculated based on the most recent Accounting Period report, the
Reinsurer shall, no later than five (5) calendar days following the date on
which the relevant report is required to be delivered pursuant to this Section
4.6, transfer additional Eligible Assets to the Trust Account so that the
aggregate Statutory Book Value of the Eligible Assets held in the Trust Account
is not less than the Required Balance.
(ii) Any Recoverables assigned to the Reinsurer pursuant to Section 3.2 shall be
paid directly to the Reinsurer.
(iii) If the aggregate Statutory Book Value of the Eligible Assets in the Trust
Account at the end of any Accounting Period exceeds one hundred and two percent
(102%) of the Required Balance, then the Reinsurer shall have the right to
withdraw the excess upon notice to the Ceding Company.
(b) Following the occurrence of a Triggering Event or a Reserve Credit Event:
(i) If the aggregate Fair Market Value of the Eligible Assets held in the Trust
Account at the end of any Accounting Period is less than the Required Balance,
calculated based on the most recent Accounting Period report, the Reinsurer
shall, no later than five (5) calendar days following the date on which the
relevant report is required to be delivered pursuant to this Section 4.6,
transfer additional Eligible Assets to the Trust Account so that the aggregate
Fair Market Value of the
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Eligible Assets held in the Trust Account is not less than the Required Balance.
(ii) Any Recoverables assigned to the Reinsurer pursuant to Section
26
3.2 shall be deposited directly into the Trust Account to the extent the
aggregate Fair Market Value of the Eligible Assets held in the Trust Account is
less than the Required Balance.
(iii) If the aggregate Fair Market Value of the Eligible Assets in the Trust
Account at the end of any Accounting Period exceeds one hundred and two percent
(102%) of the Required Balance, then the Reinsurer shall have the right to
withdraw the excess upon notice to the Ceding Company; provided that if a
Reserve Credit Event has occurred and is continuing, then the Reinsurer shall
have the right to withdraw such excess only upon the prior written consent of
the Ceding Company, which consent shall not be unreasonably withheld, delayed or
conditioned.
SECTION 4.7 VALUATION OF ASSETS. The report required to be delivered by the
Reinsurer as described in this Section 4.7 shall include a listing of each asset
in the Trust Account and the Statutory Book Value or Fair Market Value, as
applicable, of each such asset as of the end of the relevant Accounting Period
and indicate if any such asset is not an Eligible Asset. In the event that the
Ceding Company disagrees with the calculation of the Statutory Book Value or
Fair Market Value of any Eligible Asset or whether any asset is an Eligible
Asset as set forth in such report, the Ceding Company shall within ten (10)
Business Days after its receipt of such report deliver written notice to the
Reinsurer of such disagreement and the Parties shall attempt in good faith to
resolve such disagreement. Any resolution agreed to in writing by the Parties
shall be final and binding upon the Parties. If the Parties are unable to
resolve any disagreement within ten (10) Business Days after the Ceding Company
delivers written notice of any such disagreement to the Reinsurer, the Parties
shall jointly request a Third Party Appraiser to determine the Statutory Book
Value or Fair Market Value, as applicable, of the disputed Eligible Asset or
whether the disputed asset is an Eligible Asset as of the relevant date. The
Third Party Appraiser's determination of the Statutory Book Value or Fair Market
Value, as applicable, of the disputed Eligible Asset or whether the disputed
asset is an Eligible Asset shall be final and binding upon the Parties. Each
Party shall pay one-half of the Third Party Appraiser's fees, costs and expenses
associated with the Third Party Appraiser's determination. After a final and
binding resolution of any dispute described in this Section 4.7 is reached, the
Parties agree to make any necessary adjustments under Section 4.6(a) or Section
4.6(b), as applicable, so that (i) prior to the occurrence of a Triggering Event
or a Reserve Credit Event, the aggregate Statutory Book Value or (ii) following
the occurrence of a Triggering Event or a Reserve Credit Event, the aggregate
Fair Market Value of the Eligible Assets held in the Trust Account is not less
than the Required Balance nor, absent the occurrence of a Triggering Event or a
Reserve Credit Event, greater than 102% of the Required Balance.
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SECTION 4.8 RESERVE CREDIT. Should the Reinsurer fail to hold and maintain all
licenses and authorizations required under Applicable Law to enable the Ceding
Company to receive Reserve Credit, the Reinsurer shall, at its own expense, take
all steps (including the posting of letters of credit or other acceptable
security) necessary so as to permit the Ceding Company to obtain Reserve Credit.
In such event and at the request of the Reinsurer, the Ceding Company shall
cooperate in good faith to promptly amend this Agreement and the Trust
Agreement, or execute such other documents and papers, to include such
additional or alternate provisions to the extent necessary to enable the Ceding
Company to receive Reserve Credit. The Reinsurer shall promptly notify the
Ceding Company of any event or change or condition that results in a loss of
Reserve Credit.
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SECTION 4.9 ACTIONS FOLLOWING REINVESTMENT EVENT, TRIGGERING EVENT OR RESERVE
CREDIT EVENT.
(a) Upon the occurrence of a Reinvestment Event, the Reinsurer shall deposit
Eligible Assets in the Trust Account in accordance with the terms of the Trust
Agreement within five (5) Business Days of the occurrence of such Reinvestment
Event, which such Eligible Assets shall be valued at their applicable Fair
Market Value or Statutory Book Value in accordance with the provisions of
Section 4.4 and shall be sufficient to ensure that such Fair Market Value or
Statutory Book Value of the assets held in the Trust Account equals the Required
Balance.
(b) Upon the occurrence of a Triggering Event, including for the avoidance of
doubt, a Triggering Event that occurs following a Trust Withdrawal Event, the
Reinsurer shall deposit Eligible Assets, as necessary, in the Trust Account in
accordance with the terms of the Trust Agreement within five (5) Business Days
of the applicable RBC Reporting Deadline related to such Triggering Event,
sufficient to ensure that the Fair Market Value of the assets held in the Trust
Account equals the Required Balance.
(c) Upon the occurrence of a Reserve Credit Event, including for the avoidance
of doubt, a Reserve Credit Event that occurs following a Trust Withdrawal Event,
the Reinsurer shall deposit Eligible Assets, as necessary, in the Trust Account
in accordance with the terms of the Trust Agreement within five (5) Business
Days of the Reserve Credit Event, sufficient to ensure that the Fair Market
Value of the assets held in the Trust Account equals the Required Balance.
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SECTION 4.10 TRUST WITHDRAWAL EVENT. On any day on which the Trust Withdrawal
Event Conditions are satisfied, the Reinsurer shall have the right, but not the
obligation, to withdraw all or any portion of the assets in the Trust Account.
If the Reinsurer elects to make such withdrawal upon the Trust Withdrawal Event
Conditions being satisfied, the Reinsurer shall deliver to the Ceding Company
and the trustee pursuant to the Trust Agreement a Trust Withdrawal Event Notice
substantially in the form attached hereto as Exhibit E (a "Trust Withdrawal
Event Notice"), which shall (i) certify that each of the Trust Withdrawal Event
Conditions are satisfied as of the date thereof and (ii) provide documentation
that reasonably supports such certification. In the event that the Ceding
Company is reasonably satisfied upon receipt of the Trust Withdrawal Event
Notice that each of the Trust Withdrawal Event Conditions have been met, the
Ceding Company, within five (5) Business Days of its receipt of such Trust
Withdrawal Event Notice, shall deliver to the Reinsurer and the trustee pursuant
to the Trust Agreement written notice of the Ceding Company's acknowledgement
and agreement to such Trust Withdrawal Event Notice substantially in the form
attached hereto as Exhibit F (a "Trust Withdrawal Event Acknowledgment"), such
delivery of a Trust Withdrawal Event Acknowledgment by the Ceding Company shall
not be unreasonably withheld, conditioned or delayed. The delivery of a Trust
Withdrawal Event Acknowledgment to the trustee pursuant to the Trust Agreement
shall constitute a "Trust Withdrawal Event" for purposes of this Agreement.
Pursuant to the terms of the Trust Agreement, upon the occurrence of a Trust
Withdrawal Event, the Reinsurer shall be permitted to withdraw all Eligible
Assets then held in the Trust Account.
SECTION 4.11 CURE OF TRIGGERING EVENT OR RESERVE CREDIT EVENT. On any day
following the occurrence of a Triggering Event or a Reserve Credit Event on
which the events that caused the applicable Triggering Event or Reserve Credit
Event no longer exist, the Reinsurer shall have the right, but not the
obligation, to make an election to apply the terms and conditions of this
Agreement as modified by this Section 4.11. If the Reinsurer makes such an
election, the Reinsurer shall deliver to the Ceding Company and the trustee
pursuant to the Trust Agreement a Cure Notice substantially in the form attached
hereto as Exhibit G (a "Cure Notice"), which shall (i) certify that no
Triggering Event or Reserve Credit Event is occurring as of the date thereof and
(ii) provide documentation that reasonably supports such certification. In the
event that the Ceding Company is reasonably satisfied upon receipt of the Cure
Notice that no Triggering Event or Reserve Credit Event is occurring as of the
date thereof, the Ceding Company, within five (5) Business Days of its receipt
of such Cure Notice, shall deliver to the Reinsurer and the trustee pursuant to
the Trust Agreement written notice of the Ceding Company's acknowledgement and
agreement to such Cure Notice substantially in the form attached hereto as
Exhibit H (a "Cure Acknowledgment"), such delivery of a Cure Acknowledgment by
the Ceding Company shall not be unreasonably withheld, conditioned or delayed.
The delivery of a Cure Acknowledgment to the trustee pursuant to the Trust
Agreement shall constitute a "Cure Event" for purposes of this Agreement.
Immediately following the occurrence of a Cure Event and until the occurrence of
a subsequent Triggering Event or Reserve Credit Event, the Reinsurer and the
Ceding Company hereby agree to apply the terms and conditions of this Agreement
as if the applicable Triggering Event or Reserve Credit Event that has been
cured pursuant to the Cure Event did not occur.
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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 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 which attaches as a result. If the failure of either Party to comply
with any provision of this Agreement is unintentional or the result of a
misunderstanding or oversight and such failure to comply is promptly rectified,
both Parties shall be restored as closely as possible to the positions they
would have occupied if no error or oversight had occurred. This Section 5.1
shall not be utilized to cede any obligation or liability that was not intended
to have been ceded in accordance with this Agreement, including any Excluded
Liabilities.
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.
SECTION 5.3 REGULATORY MATTERS. 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 reasonable best 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
INSOLVENCY
SECTION 6.1 INSOLVENCY OF THE CEDING COMPANY. Subject to Section 6.1(a), in the
event of the insolvency of the Ceding Company, all reinsurance made, ceded,
renewed or otherwise becoming effective under this Agreement with respect to the
General Account Liabilities 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. 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 General Account Liability 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
31
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.
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(a) In the event of the insolvency of the Ceding Company, subject to Applicable
Law, the Reinsurer shall pay any General Account Liabilities otherwise due and
payable by the Reinsurer to the Ceding Company hereunder directly to the named
insureds or their designees under the Covered Insurance Policies (the "Payee"),
in accordance with and subject to the terms, conditions, exclusions and
limitations of such Covered Insurance Policy. Any such payment by the Reinsurer
shall discharge the Ceding Company from its related payment obligation under the
subject Covered Insurance Policy and shall be treated as a payment by the Ceding
Company for all purposes of such Covered Insurance Policy and related
documentation and otherwise. In the event of any payment by the Reinsurer under
this Section 6.1(a), the Reinsurer shall have the right to mitigate loss or
otherwise to exercise any right of the Ceding Company with respect to the
applicable loss or claim under the Covered Insurance Policies.
(b) The Reinsurer shall have no obligation to indemnify the Ceding Company for
amounts paid or payable by the Ceding Company in respect of a Covered Insurance
Policy to the extent of any payments made by the Reinsurer to the applicable
Payee under such Covered Insurance Policy in accordance with Section 6.1(a), and
the Reinsurer shall be discharged of its payment obligations to the Ceding
Company, or to its statutory liquidator, receiver or statutory successor under
this reinsurance to the extent of such payments. The cut-through afforded by
Section 6.1(a) shall not be available pursuant to this Agreement if, under
Applicable Law, regulation, court rule or order or similar requirement either:
(i) the Reinsurer's direct payment to such Payee will not, to the extent
thereof, discharge the Reinsurer's obligations to the Ceding Company or its
legal representative, or (ii) the Reinsurer is required to make any payment to
the Ceding Company or its liquidator, receiver or statutory successor
notwithstanding the provisions of this Agreement. Nothing herein or in any
Covered Insurance Policy shall be construed to require the Reinsurer to make
duplicative payments or payments duplicative of payments that have been made by
the Ceding Company.
(c) It is the intent of the Parties that the cut-through provision of this
Section 6.1 complies with Section 38a-88-10 of the Connecticut Insurance
Regulations and any successor statute or amendments thereto. At the Reinsurer's
option, the Ceding Company and the Reinsurer shall in good faith negotiate
amendments to the cut-through provision of this Section 6.1 and/or in good faith
negotiate other agreements or additional documents, as necessary, to assure that
the cut-through provision complies with Section 38a-88-10 of the Connecticut
Insurance Regulations and any successor statute or amendments thereto. The
Reinsurer shall reimburse the Ceding Company for all costs and expenses related
to such amendments, agreements and documents, whether entered into or not. All
other terms and conditions of this Agreement shall remain in full force and
effect.
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(d) For the avoidance of doubt, the provisions of this Section 6.1 shall apply
only in connection with the General Account Liabilities.
(e) The Ceding Company covenants that it shall not, and shall not, directly or
indirectly, cause any third party to, challenge in any legal or regulatory
proceeding with respect to the matters set forth in this Section 6.1.
ARTICLE VII
DURATION; RECAPTURE
SECTION 7.1 DURATION. Without limiting any provision of the Purchase Agreement,
this Agreement shall commence at the Effective Time and continue in force until
such time as (a) the Ceding Company's Liability arising out of or related to all
Covered Insurance Policies reinsured hereunder is terminated in accordance with
their respective terms, or the Ceding Company has elected to recapture the
reinsurance of Covered Insurance Policies in full in accordance with Section
7.3, and (b) the Ceding Company has received payments which discharge such
Liability in full in accordance with Section 7.4.
SECTION 7.2 SURVIVAL. Notwithstanding the other provisions of this Article VII,
the terms and conditions of Articles I, VII and VIII and the provisions of
Sections 9.1, 9.5, 9.10, 9.11 and 9.12 shall remain in full force and effect
after the termination of this Agreement.
SECTION 7.3 RECAPTURE.
(a) Upon the occurrence of a Recapture Triggering Event, the Ceding Company
shall have the right (but not the obligation) within sixty (60) calendar days of
such event to recapture all, and not less than all, of the outstanding
reinsurance ceded under this Agreement as of the effective date of the
recapture, by providing the Reinsurer with written notice of its intent to
effect recapture. Recapture of the Covered Insurance Policies shall be effective
on the tenth (10th) day following the day on which the Ceding Company has
provided the Reinsurer with such notice (the "Recapture Date"). Upon a recapture
by the Ceding Company, 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. For the
avoidance of doubt, the Ceding Company shall have the option to recapture in
accordance with this Section 7.3 upon each subsequent occurrence of a Recapture
Triggering Event and not only upon the initial occurrence of any Recapture
Triggering Event.
(b) Following a recapture pursuant to this Section 7.3, subject to the payment
obligations described in Section 7.4, both the Ceding Company and the Reinsurer
will be fully and finally released from all rights and obligations under this
Agreement other than with respect to any Reinsurer Extra Contractual Obligations
which will remain due to the Ceding Company. Following the consummation of the
recapture or termination, no additional Premiums or other amounts payable under
such Covered Insurance Policies shall be payable to the Reinsurer hereunder and
nor, for the avoidance of doubt, shall the Reinsurer have any further right to
receive any Recoverables.
(c) Notwithstanding the remedies contemplated by this Article VII or the
Transaction Agreements, the Ceding Company may, in its sole discretion, require
direct payment by the Reinsurer of any sum in default under this Agreement or
any Transaction Agreement in lieu of exercising the remedies in this Article
VII, and it shall be no defense to any such claim that the Ceding Company might
have had other recourse.
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SECTION 7.4 RECAPTURE PAYMENTS. In connection with a recapture pursuant to
Section 7.3, the Reinsurer shall prepare a settlement statement within fifteen
(15) calendar days of the Recapture Date (the "Terminal Settlement Statement")
setting forth the terminal settlement calculated in accordance with Exhibit D
for the Terminal Accounting Period (the "Terminal Settlement"). If the amount of
the Terminal Settlement for the Terminal Accounting Period is positive, the
Ceding Company shall pay such amount to the Reinsurer within five (5) calendar
days of its receipt of the Terminal Settlement Statement. If the amount of the
Terminal Settlement for the Terminal Accounting Period is negative, the
Reinsurer shall pay the absolute value of such amount to the Ceding Company at
the time it delivers the Terminal Settlement Statement to the Ceding Company. In
addition, following the Recapture Date, the Trust Account shall be terminated
and any remaining amounts or amount held in trust pursuant to Section 4.3 shall
be released to the Reinsurer after the full satisfaction of the Terminal
Settlement pursuant to the Terminal Settlement Statement.
ARTICLE VIII
INDEMNIFICATION; DISCLAIMER
SECTION 8.1 REINSURER'S OBLIGATION TO INDEMNIFY. From and after the Effective
Time, the Reinsurer shall indemnify, defend and hold harmless the Ceding
Company, its Affiliates and their respective Representatives and their
respective successors and permitted assignees (collectively the "Ceding Company
Indemnified Parties") from and against any Losses imposed on, sustained,
incurred or suffered by any of the Ceding Company Indemnified Parties to the
extent arising from, relating to or in connection with (i) any breach by the
Reinsurer of the covenants and agreements of the Reinsurer contained in this
Agreement, (ii) the Reinsured Liabilities and (iii) any Liabilities relating to
periods on or after the Effective Time relating to regulatory or similar matters
contemplated in Section 5.3. For the avoidance of doubt, the Reinsurer shall not
be required to indemnify the Ceding Company for Ceding Company Extra Contractual
Liabilities.
SECTION 8.2 CEDING COMPANY'S OBLIGATION TO INDEMNIFY. From and after the
Effective Time, the Ceding Company hereby agrees to indemnify, defend and hold
harmless the Reinsurer, its Affiliates and their respective Representatives and
their respective successors and permitted assignees (collectively, the
"Reinsurer Indemnified Parties") from and against any Losses imposed on,
sustained, incurred or suffered by any of the Reinsurer Indemnified Parties to
the extent arising from, relating to or in connection with (i) any breach by the
Ceding Company of the covenants and agreements of the Ceding Company contained
in this Agreement, and (ii) any Excluded Liability and (iii) any Liabilities
relating to periods prior to the Effective Time relating to regulatory or
similar matters contemplated in Section 5.3. For the avoidance of doubt, the
Ceding Company shall not be required to indemnify the Reinsurer for Reinsurer
Extra Contractual Liabilities.
35
SECTION 8.3 NOTICE OF CLAIM; DEFENSE.
Subject to the terms of Article X of the Administrative Services Agreement:
(a) If (i) any non-affiliated third party or Governmental Body institutes,
threatens 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
VIII (a "Third-Party Claim") or (ii) any Person entitled to indemnification
under this Agreement (an "Indemnified Party") shall have a 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 to the extent practicable
based on then-available information, a good faith estimate of the amount of all
related Losses (a "Claim Notice"); provided, however, that the failure to
provide such notice shall not release the Indemnifying Party from any of its
indemnification obligations under this Article VIII except to the extent that
the Indemnifying Party is actually prejudiced by the failure of the Indemnified
Parties to provide a timely and adequate Claim Notice.
(b) 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 8.3(b), in the event of a Third-Party Claim, the
Indemnifying Party may elect to assume, at its own expense, the defense of a
Third-Party Claim and retain counsel reasonably acceptable to the Indemnified
Parties to represent such Indemnified Parties in connection with such
Third-Party Claim. Subject to Section 8.3(b), the Indemnified Parties may
participate, at their own expense and through separate legal counsel of their
choice, in the defense of any such Third-Party Claim; provided, however, that
the Indemnifying Party shall (i) control the defense of the Indemnified Parties
in connection with such Action and (ii) bear the reasonable fees, costs and
expenses of such separate counsel if an actual or potential conflict of interest
makes representation by the same counsel inappropriate. The Indemnifying Party
shall be liable for the fees and expenses of counsel employed by the Indemnified
Party for any period during which the Indemnifying Party has not assumed the
defense of a Third-Party Claim to the extent that such Third-Party Claim is
subject to indemnification by the Indemnifying Party under this Article VIII. If
the Indemnifying Party chooses to assume the defense of any Third-Party Claim,
the Reinsurer or the Ceding Company (as the case may be) shall, and shall cause
each of its Affiliates and Representatives to, reasonably cooperate (including,
upon the reasonable request of the other Party, making
36
reasonably available books, records and personnel with respect to the subject
matter of such Third-Party Claim) with the Indemnifying Party in the defense of
such Third-Party Claim. All costs and expenses incurred in connection with such
reasonable cooperation shall be borne by the Indemnifying Party. If the
Indemnifying Party has assumed the defense of any Third-Party Claim, the
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, consent to a settlement, compromise or discharge of, or the
entry of any judgment arising from, any Third-Party Claim; provided, however,
that no such consent shall be required if (i) such settlement, compromise,
discharge or entry of any judgment (A) does not involve any finding or admission
of any violation of Applicable Law or admission of any wrongdoing or any
violation of the rights of any Person and does not include a statement or
admission of fault, culpability or failure to act by or on behalf of any
Indemnified Party, and (B) does not subject the Indemnified Party to any
injunctive relief or other equitable remedy and does not encumber any of the
assets of any Indemnified Party or result in any restriction or condition that
would apply to or affect any Indemnified Party or the conduct of any Indemnified
Party's business and (ii) (A) the Indemnifying Party pays or causes to be paid
all amounts arising out of such settlement or judgment concurrently with the
effectiveness of such settlement or judgment (unless otherwise provided in such
settlement or judgment) and (B) such settlement, compromise, discharge or entry
of judgment includes a complete and unconditional release of each Indemnified
Party from any and all Liabilities in respect of such Third-Party Claim. If the
Indemnifying Party has assumed the defense of a Third-Party Claim, and is in
compliance with its obligations under this Section 8.3(c), the Indemnified Party
shall not settle, compromise or consent to the entry of any judgment with
respect to such Third-Party Claim or admit to any liability with respect to such
Third-Party Claim without the prior written consent of the Indemnifying Party
(which shall not be unreasonably withheld, delayed or conditioned). If the
Indemnifying Party elects not to defend the Indemnified Party against a
Third-Party Claim, then the Indemnified Party shall have the right to assume its
own defense (without in any way waiving or otherwise affecting the Indemnified
Party's rights to indemnification pursuant to this Agreement), and the fees,
charges and disbursements of no more than one such counsel per jurisdiction
selected by the Indemnified Party shall be reimbursed by the Indemnifying Party.
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 (not to be unreasonably withheld, conditioned or delayed).
SECTION 8.4 NO DUPLICATION; EXCLUSIVE REMEDY.
(a) Any Liability for indemnification hereunder or under any Transaction
Agreement shall be determined without duplication of recovery by reason of the
same Loss.
(b) Except as provided under (i) the provisions hereof providing for equitable
remedies or (ii) 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 a breach of 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, in the absence of
willful misconduct, willful and material breach or fraud, as provided in this
Article VIII and Article IX.
37
SECTION 8.5 LIMITATION ON SET-OFF. Neither the Reinsurer nor the Ceding Company
shall have any right to set off any unresolved indemnification claim pursuant to
this Article VIII against any payment due pursuant to Article III or Section 7.4
or any Transaction Agreement.
SECTION 8.6 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
VIII, such Indemnified Party shall promptly pay over to the Indemnifying Party
the amount so recovered (net of any outof-pocket expenses incurred by such
Indemnified Party in collecting such amount and net of such Indemnified Party's
estimated increase in such Person's and its Affiliates' next annual insurance
premium arising out of such Loss (the "Estimated Premium Increase"), but not in
excess of (x) 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, minus (y) the amount of the Estimated Premium
Increase. If a payment by an Indemnified Party to an Indemnifying Party is made
pursuant to the immediately preceding sentence and the actual increase in such
Indemnified Party's and its Affiliates' next annual insurance premium arising
out of the applicable Loss is more than or less than the amount of the Estimated
Premium Increase, the Indemnifying Party or the Indemnified Party, respectively,
shall pay to the other the amount by which the actual increase exceeds, or is
less than, as applicable, the Estimated Premium Increase.
(b) If any portion of Losses to be reimbursed by the Indemnifying Party pursuant
to this Article VIII would reasonably be expected to be recoverable 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 reasonably promptly after becoming aware of such fact give notice thereof
to the Indemnifying Party and, upon the request of the Indemnifying Party, shall
use its reasonable best efforts as directed by the Indemnifying Party to collect
the amount recoverable from such third party, in which event the Indemnifying
Party shall reimburse the Indemnified Party for all costs and expenses incurred
in connection with such collection. If any portion of Losses actually paid by
the Indemnifying Party pursuant to this Article VIII would reasonably be
expected to have been recoverable 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 VIII.
SECTION 8.7 RIGHT TO INDEMNIFICATION. Notwithstanding any other provision in
this Agreement to the contrary, the rights of the Indemnified Parties under this
Article VIII shall not be affected by any investigation conducted, or any
knowledge acquired (or capable of being acquired), at any time, whether before
or after the execution and delivery of this Agreement or the Effective Time,
including with respect to any information provided under Section 7.3 of the
Purchase Agreement. The waiver of any condition based on the performance of or
compliance with any covenant, agreement, condition and obligation set forth in
this Agreement, shall not affect the right to indemnification or other remedy
based on such representations, warranties, covenants, agreements, conditions and
obligations.
38
SECTION 8.8 COST OF ENFORCEMENT. If any claim for indemnification is brought by
a Party to this Agreement under this Article VIII, the prevailing Party in any
such claim for indemnification shall be reimbursed by the other Party for all of
its reasonable attorneys' fees and costs and expenses incurred in connection
with enforcement of such claim, in addition to any other relief to which such
prevailing Party may be entitled. For purposes of the foregoing, (a) "prevailing
Party" means (i) in the case of the Party initiating the enforcement of rights
or remedies, that it recovered substantially all of its claims, and (ii) in the
case of the Party defending against such enforcement, that it successfully
defended substantially all of the claims made against it, and (b) if neither
Party is a "prevailing Party" within the meaning of the foregoing, then neither
Party will be entitled to recover its reasonable attorneys' fees, costs and
expenses from the other Party.
SECTION 8.9 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 IX
MISCELLANEOUS
SECTION 9.1 REMEDIES. Each Party agrees that any failure to perform, or breach
of its obligations under this Agreement will result in irreparable injury to the
other Party, that the remedies available to such other Party at law alone will
be an inadequate remedy for such failure or breach and that, in addition to any
other legal or equitable remedies that such other Party may have, such other
Party may seek to enforce its rights in court by an Action for specific
performance and the Parties expressly waive the defense that a remedy in damages
will be adequate or that an award of specific performance is not an appropriate
remedy for any reason at law or equity. Any Party seeking an order or injunction
to prevent or cure breaches of this Agreement and to enforce specifically the
terms and provisions of this Agreement shall not be required to provide any bond
or other security in connection with any such order or injunction. The Parties
further agree that (a) by seeking any remedy provided for in this Section 9.1, a
Party shall not in any respect waive its right to seek any other form of relief
that may be available to such Party under this Agreement and (b) nothing
contained in this Section 9.1 shall require any Party to institute any action
for (or limit any Party's right to institute any action for) specific
performance under this Section 9.1 before exercising any other right under this
Agreement.
SECTION 9.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut (without regard to conflict
of laws principles that might lead to the application of the laws of another
jurisdiction).
39
SECTION 9.3 JURISDICTION; VENUE. Each of the Parties hereto irrevocably agrees
that any and all Actions arising out of, relating to or in connection with this
Agreement or the transactions contemplated by this Agreement or the formation,
breach, termination or validity of this Agreement brought by any other Party or
its successors or assigns, shall be brought and determined exclusively in any
district court of the United States of America located in the State of
Connecticut, or, in the event that such courts do not have subject matter
jurisdiction over such Action, in the courts of the State of Connecticut. Each
of the Parties agrees that mailing of process or other papers in connection with
any such Action in the manner provided in Section 9.5, or in such other manner
as may be permitted by Applicable Law, 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 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 or the transactions contemplated by this Agreement or
the formation, breach, termination or validity of this Agreement (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 should be dismissed on the basis of FORUM NON CONVENIENS, (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.
SECTION 9.4 JURY WAIVER. 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 9.4.
SECTION 9.5 NOTICES. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the Party to whom
notice is to be given, (b) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (c) on the day of
transmission if sent via electronic mail to the email address given below, and
telephonic confirmation of receipt is obtained promptly after completion of
transmission, or (d) on the second 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:
40
(a) If to the Reinsurer, to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
Attention: Elaine Sarsynski
Facsimile: 413-744-1177
Email: esarsynski@massmutual.com
with copies to (which shall not constitute notice):
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
Attention: General Counsel
Facsimile: 413-226-4134
Email: mroellig49@massmutual.com
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Robert J. Sullivan
J. Stephanie Nam
Facsimile: 212-735-2000
Email: robert.sullivan@skadden.com
stephanie.nam@skadden.com
(b) If to the Ceding Company, to:
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
Attention: Ceded Reinsurance & General Counsel
Facsimile: (866) 522-0308
Email: james.heavner@thehartford.com
alan.kreczko@thehartford.com
with copies to (which shall not constitute notice):
The Hartford Financial Services Group, Inc.
One Hartford Plaza
Hartford, CT 06155
Attention: Ceded Reinsurance & General Counsel
Facsimile: (860) 547-6959
Email: james.heavner@thehartford.com
alan.kreczko@thehartford.com
41
Sidley Austin LLP
One South Dearborn
Chicago, Illinois 60603
Attention: Perry J. Shwachman
Facsimile: (312) 853-7036
Email: pshwachman@sidley.com
or to such other address as such Party may indicate by a notice delivered to the
other Parties hereto in accordance with this Section 9.5.
SECTION 9.6 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
(a) The rights and obligations of a Party under this Agreement shall not be
assignable or delegable by such Party without the written consent of the other
Parties.
(b) This Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their successors and permitted assigns. Except as otherwise provided
in Article VIII, 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 assigns permitted by this Section 9.6 any right,
remedy or claim under or by reason of this Agreement.
SECTION 9.7 ENTIRE AGREEMENT; AMENDMENTS.
(a) This Agreement, the Exhibits and Schedules referred to herein, and the
Transaction Agreements contain the entire understanding of the Parties hereto
with regard to the subject matter contained herein or therein, and supersede all
other prior representations, warranties, agreements, understandings or letters
of intent between or among any of the Parties, which representations,
warranties, agreements, understandings or letters of intent shall be of no force
or effect for any purpose, and shall be interpreted without reference to any
prior drafts hereof.
(b) This Agreement may not be amended, modified or supplemented except by a
written instrument signed by an authorized Representative of each of the Parties
or their respective successors in interest.
SECTION 9.8 INTERPRETATION. The table of contents, articles, titles and headings
to sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to herein shall be construed with
and as an integral part of this Agreement to the same extent as if they were set
forth verbatim herein. All references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits
and Schedules to, this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Unless the context otherwise requires, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. Subject to Section
9.5, all references to "written notice" herein shall include notice by print,
fax or electronic mail. All references to a "willful and material breach" refer
to an action or omission that the breaching Party takes or omits to take with
the intent of breaching this Agreement. 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. Except as otherwise
set forth herein, any agreement or instrument defined or referred to herein or
any agreement or instrument that is referred to herein means such agreement or
instrument as from time to time amended, modified or supplemented, including by
waiver or consent, and references to all attachments thereto and
42
instruments incorporated therein. Any statute or regulation referred to herein
means such statute or regulation as amended, modified, supplemented or replaced
from time to time (and, in the case of any statute, includes any rules and
regulations promulgated under such statute), and references to any section of
any statute or regulation include any successor to such section. Any agreement
referred to herein shall include reference to all Exhibits, Schedules and other
documents or agreements attached thereto. References to dollars or "$" shall
mean U.S. dollars. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the Party
drafting or causing any instrument to be drafted. Each representation, warranty,
covenant, agreement and condition contained in this Agreement shall have
independent significance.
43
SECTION 9.9 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 9.10 EXPENSES. Except as otherwise expressly set forth in this Agreement
(including in Article VIII) and the Transaction Agreements, each Party hereto
will pay all costs and expenses incident to its negotiation and preparation of
this Agreement and the Transaction Agreements and to its performance and
compliance with all agreements and conditions contained herein or therein on its
part to be performed or complied with, including the fees, expenses and
disbursements of its counsel and independent public accountants.
SECTION 9.11 PARTIAL INVALIDITY. Wherever possible, each provision hereof shall
be interpreted in such manner as to be effective and valid under Applicable Law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability without invalidating the remainder of
such invalid, illegal or unenforceable provision or provisions or any other
provisions hereof, so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in any manner
adverse to any Party. Upon such determination that any provision is invalid,
illegal or unenforceable, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated by this Agreement be consummated as originally contemplated to the
greatest extent possible.
44
SECTION 9.12 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, including by facsimile or by electronic delivery in .pdf
format, each of which shall be considered an original instrument, but all of
which shall be considered one and the same agreement, and shall become binding
when one or more counterparts have been signed and delivered by each of the
Parties hereto.
SECTION 9.13 TREATMENT OF CONFIDENTIAL INFORMATION. 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 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.
[The rest of this page intentionally left blank.]
45
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
effective .
HARTFORD LIFE INSURANCE COMPANY
By: /s/ David C. Robinson
------------------------------
Name: David C. Robinson
Title: Sr. Vice President
[Signatures Continue onto Next Page]
Reinsurance Agreement Signature Page
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Elaine A. Sarsynski
------------------------------
Name: Elaine A. Sarsynski
Title: Executive Vice President
Reinsurance Agreement Signature Page
SCHEDULE 1.1(A)
COVERED INSURANCE POLICIES
[SEE ATTACHED]
SCHEDULE 1.1(B)
SEPARATE ACCOUNTS
SEPARATE ACCOUNTS REGISTERED AS INVESTMENT COMPANIES:
GOVERNMENT/TAX-EXEMPT SEGMENT
Hartford Life Insurance Company DC Variable Account I
Hartford Life Insurance Company Separate Account Two **
Hartford Life Insurance Company Separate Account Eleven
Hartford Life Insurance Company Separate Account Twelve
SEPARATE ACCOUNTS NOT REGISTERED IN RELIANCE ON SECTION 3(C)(11) OF THE
INVESTMENT COMPANY ACT OF 1940 AND SECTION 3(A)(2) OF THE SECURITIES ACT OF
1933:
GOVERNMENT/TAX-EXEMPT SEGMENT
Hartford Life Insurance Company Separate Account Fourteen
Hartford Life Insurance Company Separate Account 457
Hartford Life Insurance Company DC Variable Account III
Hartford Life Insurance Company DC Variable Account IV
Hartford Life Insurance Company DC Variable Account V
Hartford Life Insurance Company DC Variable Account VI
Hartford Life Insurance Company Separate Account UFC
CORPORATE 401(K) SEGMENT
Hartford Life Insurance Company Group Annuity Separate Account K
Hartford Life Insurance Company Group Annuity Separate Account K-1
Hartford Life Insurance Company Group Annuity Separate Account K-2
Hartford Life Insurance Company Group Annuity Separate Account K-3
Hartford Life Insurance Company Group Annuity Separate Account K-4
Hartford Life Insurance Company Group Annuity Separate Account TK
Hartford Life Insurance Company Group Annuity Separate Account TK-1
Hartford Life Insurance Company Group Annuity Separate Account TK-2
Hartford Life Insurance Company Group Annuity Separate Account TK-3
Hartford Life Insurance Company Group Annuity Separate Account TK-4
Hartford Life Insurance Company Group Annuity Separate Account UK
Hartford Life Insurance Company Group Annuity Separate Account UK-2
Hartford Life Insurance Company Group Annuity Separate Account UK-3
Hartford Life Insurance Company Group Annuity Separate Account UK-4
Hartford Life Insurance Company Group Annuity Separate Account VK
Hartford Life Insurance Company Group Annuity Separate Account VK-1
Hartford Life Insurance Company Group Annuity Separate Account VK-2
Hartford Life Insurance Company Group Annuity Separate Account VK-3
Hartford Life Insurance Company Group Annuity Separate Account VK-4
Hartford Life Insurance Company Separate Account 401
Hartford Life Insurance Company Separate Account A
Hartford Life Insurance Company Separate Account 9
** HLIC Separate Account Two is used by both Retirement and Individual Annuity
lines of business.
EXHIBIT A
FORM OF TRUST AGREEMENT
[SEE ATTACHED]
EXHIBIT A
RESERVE TRUST AGREEMENT
BY AND AMONG
HARTFORD LIFE INSURANCE COMPANY,
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
AND
CITIBANK N.A.
Dated as of: December 31, 2012
TABLE OF CONTENTS
PAGE
--------------------------------------------------------------------------------
Section 1. Deposit of Assets to the Reserve Trust Account 2
Section 2. Withdrawal of Assets from the Reserve Trust Account 6
Section 3. Procedure for Withdrawals of Assets; Certain Covenants 7
Section 4. Redemption, Investment and Substitution of Assets 9
Section 5. The Income Account 10
Section 6. Taxes; Right to Vote Assets 10
Section 7. Additional Rights and Duties of the Trustee 11
Section 8. The Trustee's Compensation, Expenses and Indemnification 13
Section 9. Resignation of the Trustee 14
Section 10. Triggering Event 14
Section 11. Reserve Credit Event 17
Section 12. Termination of the Reserve Trust Account 19
Section 13. Definitions 19
Section 14. Remedies 24
Section 15. Governing Law 24
Section 16. Jurisdiction; Venue 25
Section 17. Jury Waiver 25
Section 18. Notices 25
Section 19. Successors and Assigns; No Third-Party Beneficiaries 27
Section 20. Entire Agreement; Amendments 27
Section 21. Interpretation 28
Section 22. Waivers 28
Section 23. Expenses 29
Section 24. Partial Invalidity 29
Section 25. Execution in Counterparts 29
EXHIBITS
A -- Initial Transferred Assets
B-1 -- Form of Beneficiary Withdrawal Notice
B-2 -- Form of Grantor Withdrawal Notice
B-3 -- Form of Grantor Withdrawal Notice Consent
B-4 -- Form of Trust Withdrawal Event Notice
B-5 -- Form of Trust Withdrawal Event Acknowledgment
C -- Investment Guidelines
D -- Form of Cure Notice
E -- Form of Cure Acknowledgment
Appendix 1 -- Reserve Trust Account Opening Letters
Appendix 2 -- Asset Transfer Notification
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RESERVE TRUST AGREEMENT
THIS RESERVE TRUST AGREEMENT, dated as of December 31, 2012 (this "Agreement"),
is by and among MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a mutual life
insurance company domiciled in the Commonwealth of Massachusetts (hereinafter
the "Grantor"), HARTFORD LIFE INSURANCE COMPANY, a life insurance company
domiciled in the State of Connecticut (such insurer and its successors by
operation of law, including, without limitation, any liquidator, rehabilitator,
receiver or conservator thereof, being hereinafter referred to as the
"Beneficiary"), and Citibank N.A. as trustee, for the benefit of the Beneficiary
(such bank, in its capacity as trustee, being referred to as the "Trustee").
RECITALS
WHEREAS, pursuant to a Reinsurance Agreement dated the date hereof between the
Grantor and the Beneficiary (the "Reinsurance Agreement"), the Beneficiary is
ceding to the Grantor, and the Grantor is reinsuring, on an indemnity
reinsurance basis, the General Account Liabilities and, on a modified
coinsurance basis, the Separate Account Liabilities under the Covered Insurance
Policies (as such terms are defined in the Reinsurance Agreement) issued by the
Beneficiary pursuant to the terms and conditions thereof;
WHEREAS, pursuant to Section 4.2 of the Reinsurance Agreement, the Grantor and
the Beneficiary desire to establish with the Trustee trust accounts with account
numbers 240146, 240147, 240148 and 30920211 (collectively, the "Reserve Trust
Account"), and transfer to the Trustee for deposit in the Reserve Trust Account
Assets (as hereinafter defined) to be made subject to this Agreement in order to
secure payments of amounts due the Beneficiary with respect to the General
Account Liabilities under the Reinsurance Agreement and to instruct the Trustee
to establish one or more bookkeeping accounts in connection with the Reserve
Trust Account;
WHEREAS, the Grantor and Beneficiary acknowledge and agree that as further
described in and subject to the features set forth in those certain letters of
the Grantor attached hereto as Appendix 1, the Reserve Trust Account shall
initially be established and owned by and in the name of the Beneficiary
(subject to the change in ownership of the account at the Effective Time
pursuant to Section 1 of this Agreement);
WHEREAS, the Trustee is a qualified United States financial institution (as
defined in Section 38a-87(b) of the Connecticut Insurance Code);
WHEREAS, the Trustee has agreed to act as Trustee hereunder and, in accordance
with the terms hereof, to hold Assets in trust in the Reserve Trust Account on
the terms herein set forth; and
WHEREAS, this Agreement is made for the benefit of the Beneficiary and for the
purpose of setting forth the duties and powers of the Trustee with respect to
the Reserve Trust Account.
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NOW, THEREFORE, for and in consideration of the premises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree as follows:
SECTION 1. DEPOSIT OF ASSETS TO THE RESERVE TRUST ACCOUNT.
(a) Concurrently with the execution and delivery of this Agreement, the Grantor
and the Beneficiary hereby establish a Reserve Trust Account owned by and in the
name of the Beneficiary, and the Trustee hereby accepts the Reserve Trust
Account herein created and declared upon the terms provided herein and shall
administer the Reserve Trust Account as Trustee for the benefit of the
Beneficiary. The Beneficiary shall establish and the Trustee shall maintain the
Reserve Trust Account as a securities account at its offices in New York, NY;
provided, that, upon receipt by the Trustee of written confirmation of the
Beneficiary and the Grantor substantially in the form attached hereto as
Appendix 2 notifying the Trustee that all asset transfers to be effected prior
to the Effective Time pursuant to this Agreement have occurred, the Reserve
Trust Account shall automatically and irrevocably, without any further action by
any party, become an account owned by the Grantor effective as of the Effective
Time and shall thereafter be in the name of the Grantor. The Trustee and its
lawfully appointed successors are authorized and shall have power to receive
such Eligible Assets as the Grantor transfers to or vests in the Trustee or
places under the Trustee's possession and control, and to hold, invest,
reinvest, manage and dispose of the same for the uses and purposes and in the
manner and according to the provisions hereinafter set forth. All such trusteed
Eligible Assets shall be maintained in the Reserve Trust Account, separate and
distinct from all other assets of the Trustee, and shall be continuously
maintained by the Trustee.
(b) Prior to the Effective Time, the Beneficiary shall transfer or cause to be
transferred to the Trustee, for deposit to the Reserve Trust Account, the assets
listed on Exhibit A hereto as of the date hereof, and, on and after the
Effective Time, the Grantor may transfer to the Trustee, for deposit to the
Reserve Trust Account, Eligible Assets as it may from time to time be required
to deposit by this Agreement or otherwise (all such Eligible Assets and proceeds
thereof in the Reserve Trust Account are "Assets"). The Grantor, prior to
depositing Eligible Assets with the Trustee, shall, at its option, do one of the
following: (i) execute or cause to be executed assignments or endorsements in
blank in favor of the Trustee or (ii) transfer legal title to the Trustee, in
each case, of all shares, obligations or any other assets requiring assignment,
in order that the Beneficiary or the Trustee, upon the direction of the
Beneficiary, may whenever necessary negotiate any such Eligible Assets without
the consent of or signature from the Grantor or any other entity. Except as
otherwise set forth in paragraph (g) of this Section 1 and subject to the
security interest in the Assets granted by the Grantor to the Beneficiary
pursuant to this Agreement, on and after the Effective Time the Beneficiary
shall cease to be the owner of the Assets transferred to the Trustee for deposit
to the Reserve Trust Account by the Beneficiary prior to the Effective Time and
the Grantor shall be the sole owner of all Assets transferred to the Trustee for
deposit to the Reserve Trust Account including assets transferred by the Grantor
at any time or by the Beneficiary prior to the Effective Time.
(c) The Grantor hereby represents, warrants and covenants (i) that any assets
transferred by the Grantor to the Trustee for deposit to the Reserve Trust
Account (other than those assets transferred by the Beneficiary prior to the
Effective Time in accordance with Section
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3.3(b) of the Purchase Agreement) will be in such form that the Beneficiary
whenever necessary may, and the Trustee upon direction by the Beneficiary will,
negotiate any such assets without consent or signature from the Grantor or any
person in accordance with the terms of this Agreement; and (ii) that all assets
transferred by the Grantor to the Trustee for deposit to the Reserve Trust
Account will consist only of Eligible Assets.
(d) To secure the performance of the Grantor's obligations to the Beneficiary
under the Reinsurance Agreement with respect to the General Account Liabilities,
the Grantor hereby grants to the Beneficiary a security interest in and
continuing lien on all of the Grantor's right, title and interest in, to and
under the following property, whether now owned or existing or hereafter
acquired or arising, and wherever located (the "Collateral"): (i) the Reserve
Trust Account and the Assets; (ii) all Assets credited to the Reserve Trust
Account; (iii) all Security Entitlements related to the Reserve Trust Account;
and (iv) all proceeds of any of the foregoing. Any amounts withdrawn by the
Beneficiary from the Reserve Trust Account in accordance with Section 2(a) shall
be automatically released from, and withdrawn free and clear of, any security
interest created herein. Pursuant to the terms of Sections 4.2(b) and (c) of the
Reinsurance Agreement and Section 2 hereof, the Beneficiary is intended to have
control of the Assets and the Reserve Trust Account for the purpose of
perfecting the interest granted hereby. The Grantor hereby authorizes the
Beneficiary to file UCC-1 Financing Statements with respect to the Collateral.
The Trustee shall at the written direction of the Beneficiary, file the
completed UCC1 Financing Statements delivered to the Trustee by the Beneficiary
with respect to the Collateral. Upon the occurrence of a default by the Grantor
in the performance of its monetary obligations under the Reinsurance Agreement,
and upon delivery by the Beneficiary to the Grantor of a written notice thereof
in accordance with Section 2(a) of this Agreement, the Beneficiary may pursue
any remedy available at law (including those available under the provisions of
the UCC), or in equity to collect, enforce or satisfy any obligations of the
Grantor to the Beneficiary then owing with respect to the General Account
Liabilities, solely to the extent required to cure such default.
(e) The Trustee hereby confirms and agrees that:
(i) the Trustee shall not change the name or account number of the Reserve Trust
Account without the prior written consent of the Beneficiary;
(ii) the Trustee confirms and agrees that the Reserve Trust Account is a
"securities account" within the meaning of Section 8-501 of the UCC and that the
Trustee is acting in the capacity of a "securities intermediary" within the
meaning of Section 8102(a)(14) of the UCC with respect to the Reserve Trust
Account;
(iii) all securities or other property that take the form of an instrument or
certificated security underlying any financial assets credited to the Reserve
Trust Account comply with the second sentence of Section 1(b) hereof; and
(iv) each item of property (whether investment property, financial asset,
security, instrument or cash) credited to the Reserve Trust Account shall be
treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the
UCC.
(f) For purposes of perfecting the security interest in the Reserve Trust
Account, the Grantor hereby represents and warrants to the Beneficiary, and
covenants for the benefit of the Beneficiary, as follows:
(i) As of the date hereof, the Grantor is (and, for the past five (5) years, has
been) a mutual insurance company organized under the laws of the Commonwealth of
Massachusetts. For the past five (5) years and as of the date hereof, the chief
executive office of the Grantor was located at 1295 State Street, Springfield,
MA 01111-0001. The Grantor shall not change its jurisdiction of organization or
its chief executive office except upon ten (10) calendar days' prior written
notice to the Beneficiary. As of the date hereof, the Grantor's exact legal
name, as reflected in its
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organization documents of record in the Commonwealth of Massachusetts, is (and,
for the past five (5) years, has been) that set forth in the preamble hereto.
(ii) As of the Effective Time and at all times thereafter, the Grantor will own
its interest in the assets in the Reserve Trust Account free and clear of any
security interest in, or lien or adverse claim on, such assets, other than the
security interest in favor of the Beneficiary created hereunder; provided that
the Grantor makes no representation that the assets transferred by the
Beneficiary prior to the Effective Time in accordance with Section 3.3(b) of the
Purchase Agreement were, at the time of such transfer, free and clear of any
security interest in, or lien or adverse claim on, such assets. From and after
the date hereof, the Grantor shall not authorize the filing of any other
financing statement with respect to any asset in the Reserve Trust Account, nor
authorize the granting of "control" (solely for purposes of this paragraph, as
defined in the UCC) over any of such asset to any Person other than the
Beneficiary. During the term of this Agreement, the Grantor shall not, and shall
direct that the Trustee shall not, grant or cause or permit to be created or
granted in favor of any third person any security interest whatsoever in any of
the Assets in the Reserve Trust Account or in the residual interest therein.
(iii) The Grantor shall do, execute or otherwise authenticate, acknowledge and
deliver, or cause to be done, executed or otherwise authenticated, acknowledged
and delivered, such instruments of transfer or other records, and take such
other steps or actions, as the Beneficiary may reasonably deem necessary to
create, perfect or preserve the security interest granted to the Beneficiary by
Section 1(d) or to ensure that such security interest remains prior to any and
all other security interests, liens or other interests of any other Person; and
the Grantor hereby authorizes the Beneficiary to take, or cause to be taken, any
of the foregoing steps or actions upon any failure by the Grantor to perform or
comply with any written request of the Beneficiary that Grantor so perform or
comply with Grantor's obligations under this Section 1(f)(iii).
(g) Notwithstanding anything in this Agreement, including without limitation,
Sections 1 and 12 hereof, in the event the Reinsurance Agreement fails to become
effective as of the Effective Time for any reason whatsoever, the Trustee shall,
upon receipt of written instructions signed by both the Grantor and the
Beneficiary, promptly remove all Assets transferred by the Beneficiary in
accordance with Section 3.3(b) of the Purchase Agreement for deposit to the
Reserve Trust Account, and transfer all such Assets to an account of the
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Beneficiary as directed by the Beneficiary. The Trustee shall, if necessary,
execute assignments or endorsements in blank in favor of the Beneficiary in
order to transfer the Assets, including all legal title thereto, to the
Beneficiary. Notwithstanding anything herein to the contrary, it is understood
and agreed that this Agreement shall be deemed terminated and the Trustee's
obligations shall cease upon the transfer by the Trustee of all the Assets
transferred by the Beneficiary in accordance with Section 3.3(b) of the Purchase
Agreement for deposit to the Reserve Trust Account in accordance with the
instructions of the Beneficiary and the transfer of all Assets held in the
Reserve Trust Account. In the event that this Agreement is so terminated in
accordance with this Section 1, all fees, expenses and costs of the Trustee in
connection with the establishment of the Reserve Trust Account and the receipt
and delivery of any Assets contemplated in this Section 1 and under any other
provision of this Agreement, shall be promptly paid by the Grantor upon demand.
It is understood and agreed that the provisions of Section 8 shall survive the
termination of this Agreement.
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SECTION 2. WITHDRAWAL OF ASSETS FROM THE RESERVE TRUST ACCOUNT.
(a) Pursuant to Section 4.2(b) of the Reinsurance Agreement, the Beneficiary
shall have the right to withdraw Assets from the Reserve Trust Account upon
written notice to the Trustee and the Grantor substantially in the form attached
hereto as Exhibit B-1 (a "Beneficiary Withdrawal Notice") only after a default
by the Grantor in the performance of its monetary obligations under the
Reinsurance Agreement (i) which default has not been cured by the Grantor or
(ii) for which the Grantor has not provided a reasonable written explanation of
the reasons for non-payment thereof, in either case within three Business Days
following the receipt of a specific written notice thereof delivered by the
Beneficiary; provided that with respect to defaults for which the Grantor has
provided a reasonable written explanation of the reasons for non-payment
referred to in (ii) above and subject to the Beneficiary's ultimate authority
under Section 4.02 of the Administrative Services Agreement, the Beneficiary
will act at the direction of the Grantor in resolving such matters pursuant to
the Grantor's authority under the Administrative Services Agreement. Pursuant to
Section 4.2(b) of the Reinsurance Agreement, any such withdrawals shall be
utilized and applied by the Beneficiary or any successor by operation of law
(including any liquidator, rehabilitator, receiver or conservator of the
Beneficiary) only to pay amounts then due to the Beneficiary under the terms and
conditions of the Reinsurance Agreement. The Beneficiary shall be permitted to
direct the Trustee to withdraw Assets from the Reserve Trust Account not in
excess of the amount the Beneficiary is permitted to withdraw from the Reserve
Trust Account under the preceding two sentences. The Beneficiary Withdrawal
Notice shall specify the invested Assets or cash amount to be withdrawn. The
Beneficiary may designate in the Beneficiary Withdrawal Notice a third party
(the "Designee") to whom Assets specified therein shall be delivered and may
condition delivery of such Assets to such Designee upon receipt and deposit to
the Reserve Trust Account of other Assets specified in such Beneficiary
Withdrawal Notice.
(b) If the aggregate Statutory Book Value of the Eligible Assets in the Reserve
Trust Account at the end of any Accounting Period exceeds one hundred and two
percent (102%) of the Required Balance, the Grantor may provide notice to the
Beneficiary, with a copy to the Trustee, of its desire to withdraw Assets from
the Reserve Trust Account in an amount not to exceed such excess, specifying the
amount and type of Assets to be withdrawn. Within five (5) Business Days
following its delivery of such notice to the Beneficiary, the
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Grantor shall be permitted, without further notice to, or consent of, the
Beneficiary, to direct the Trustee to withdraw Assets from the Reserve Trust
Account in excess of the amount necessary to maintain such Required Balance as
of the end of the applicable Accounting Period, which notice shall be
substantially in the form attached hereto as Exhibit B-2 (a "Grantor Withdrawal
Notice"). The Grantor Withdrawal Notice shall specify the invested Assets or
cash amount to be withdrawn.
(c) At any time and from time to time, the Grantor may withdraw, upon providing
to the Beneficiary and the Trustee the Grantor Withdrawal Notice, such Assets
from the Reserve Trust Account as are specified in such Grantor Withdrawal
Notice for the sole purpose of (i) paying the General Account Liabilities under
the Covered Insurance Policies; provided, the aggregate Statutory Book Value of
the Assets maintained in the Reserve Trust Account as of any Accounting Period
end is equal to or greater than the Required Balance as of such Accounting
Period end; or (ii) paying the Terminal Settlement (as such term is defined in
the Reinsurance Agreement) to the Beneficiary pursuant to Section 7.4 of the
Reinsurance Agreement. The Grantor need present no statement or document other
than a Grantor Withdrawal Notice in order to withdraw any Assets.
(d) Upon receipt by the Trustee of a Trust Withdrawal Event Notice substantially
in the form attached hereto as Exhibit B-4 (a "Trust Withdrawal Event Notice"),
which Trust Withdrawal Event Notice has been agreed to and acknowledged by the
Beneficiary as evidenced by its execution and delivery to the Trustee and
Grantor of a Trust Withdrawal Event Acknowledgment substantially in the form
attached hereto as Exhibit B-5 (a "Trust Withdrawal Event Acknowledgment"), the
Grantor may withdraw all or a portion of the Assets from the Reserve Trust
Account by delivering a Grantor Withdrawal Notice to the Trustee.
Notwithstanding the foregoing, the Reserve Trust Account created hereunder shall
continue in existence following the withdrawal of all Assets pursuant to this
Section 2(d).
(e) The Grantor, the Beneficiary and the Trustee agree that the Trustee shall
comply with instructions (including Entitlement Orders) originated by the
Beneficiary without further consent by the Grantor or any other Person.
SECTION 3. PROCEDURE FOR WITHDRAWALS OF ASSETS; CERTAIN COVENANTS.
(a) Following receipt of a Beneficiary Withdrawal Notice, Grantor Withdrawal
Notice or a Trust Withdrawal Event Notice and in accordance with Section 2, the
Trustee shall promptly take any and all steps necessary to transfer, absolutely
and unequivocally, all right, title and interest to the invested Assets or cash
amount specified in such Beneficiary Withdrawal Notice, Grantor Withdrawal
Notice or Trust Withdrawal Event Notice, as applicable, and shall deliver such
invested Assets or cash amount as specified in such notice. The Trustee shall be
protected in relying conclusively upon any written demand, instruction,
direction, acknowledgment, statement, notice, resolution, request, consent,
order, certificate, report, appraisal, opinion, telegram, cablegram, facsimile,
electronic mail, radiogram, letter, or other communication (collectively,
"Communications") of the Beneficiary or the Grantor for any such withdrawal that
on its face conforms to requirements of this Agreement.
(b) Subject to Section 4, Section 10 and Section 11 of this Agreement, in the
absence of a Beneficiary Withdrawal Notice, a Grantor Withdrawal Notice or a
Trust Withdrawal Event Acknowledgment, the Trustee shall allow no substitutions
or withdrawals of any Asset from the Reserve Trust Account.
(c) The Grantor shall neither use, nor attempt to use, the Assets to satisfy any
of its debts, contracts or liabilities to others, except its obligations to the
Beneficiary as provided herein. The Trustee may neither take, nor consent to the
taking of, any action which would or could result in the placement of any lien
on any of the Reserve Trust Account's Assets except as stated under this
Agreement.
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In addition, the Trustee shall have no authority to assign, transfer, pledge, or
set off any of the Reserve Trust Account's Assets except as expressly permitted
herein. Neither the Grantor, nor the Trustee, nor their respective successors
and assigns, shall alienate, sell, transfer, assign, encumber or otherwise
impair any of the Reserve Trust Account's Assets except as stated under this
Agreement. Any attempt to do so is void and of no force or effect.
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SECTION 4. REDEMPTION, INVESTMENT AND SUBSTITUTION OF ASSETS.
(a) The Grantor or its designated investment advisor shall surrender for payment
all maturing Assets and all Assets called for redemption and deposit the
principal amount of the proceeds of any such payment to the Reserve Trust
Account and will provide notice thereof to the Beneficiary.
(b) From time to time, the Grantor or its designated investment advisor shall
invest and reinvest the Assets in the Reserve Trust Account in Eligible Assets.
The Trustee shall have no responsibility whatsoever to determine that such
designated investments constitute Eligible Assets, and may rely on the decision
of the Grantor or its designated investment advisor.
(c) From time to time, without prior notice to or consent of the Beneficiary,
the Grantor may direct the Trustee to substitute Assets, provided, that at the
time of such substitution, the withdrawn Assets are replaced with other Eligible
Assets having a Statutory Book Value at least equal to the Statutory Book Value
of the Assets withdrawn. The Trustee shall have no responsibility whatsoever to
determine the value of such substituted Assets or that such substituted Assets
constitute Eligible Assets.
(d) All investments and substitutions of Assets referred to in paragraphs (b)
and (c) of this Section 4 shall be in compliance with the definition of
"Eligible Assets" in Section 13. Any instruction or order concerning such
investments or substitutions of Assets shall be referred to herein as an
"Investment Order." The Trustee shall execute Investment Orders and settle
securities transactions by itself or by means of an agent or broker. The Trustee
shall not be responsible for any act or omission, or for the solvency, of any
such agent or broker.
(e) When the Trustee is directed to deliver Assets against payment, delivery
will be made in accordance with generally accepted market practice. The Trustee
is not required to make advances of cash, securities or any other property on
behalf of the Reserve Trust Account, or permit overdrafts in the Reserve Trust
Account in connection with the acquisition or disposition of Assets; provided,
however, that if the Trustee chooses to make such advance or permit such an
overdraft, such advance or overdraft shall be deemed an extension of credit by
the
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Trustee to the Grantor, which extension of credit shall be payable on demand and
shall bear interest at the Trustee's customary rate for similar extensions of
credit. The Grantor will be solely responsible for repayment of such extension
of credit and any interest thereon.
(f) Any loss incurred from any investment pursuant to the terms of this Section
4 shall be borne exclusively by the Reserve Trust Account. The Trustee shall not
be liable for any loss due to changes in market rates or penalties for early
redemption.
SECTION 5. THE INCOME ACCOUNT.
All payments of interest, dividends and other income in respect of Assets,
including all monies representing tax or other escrow deposits and all other
amounts that do not relate to payment of principal or amortization
(collectively, "Income") shall be deposited by the Trustee, subject to deduction
of the Trustee's compensation and expenses as provided in Section 8, in a
separate account (the "Income Account") established and maintained by the
Trustee on behalf of the Grantor at an office of the Trustee in New York, NY.
Any Income automatically credited on the payment date to the Income Account
which is not subsequently received by the Trustee shall be reimbursed by the
Grantor to the Trustee and the Trustee may debit the Income Account for this
purpose. Any amounts deposited in the Income Account are not part of the Assets
in the Reserve Trust Account and as such are not subject to the terms and
conditions of this Agreement with respect to the Assets in the Reserve Trust
Account; provided, however, notwithstanding anything herein to the contrary, it
is understood and agreed that the break-down or allocation of all such monies
received or credited as Income shall be provided by the Grantor or its
designated agent, and the Trustee may conclusively rely on such break-down and
information provided to it and shall have no duty to question or otherwise
confirm such break-down or allocations as provided by the Grantor or its
designated agent. The Beneficiary hereby acknowledges and agrees that the
Trustee may rely on any such break-down and information provided to it by the
Grantor, and the Beneficiary shall have no right to dispute the Trustee's
reliance on such any such break-down and information; provided, however, nothing
in this Section 5 shall constitute a waiver by the Beneficiary of its right to
dispute with the Grantor any break-down or allocation of any such monies. For
the avoidance of doubt, all amounts paid in respect of Assets that relate to
payment of principal or amortization shall be transferred by the Grantor or its
agent to the Reserve Trust Account.
SECTION 6. TAXES; RIGHT TO VOTE ASSETS.
(a) The Grantor shall pay, prior to delinquency, all taxes, assessments and
other charges levied upon the Assets or the Reserve Trust Account and shall
discharge all liens against the Assets and the Reserve Trust Account; provided,
however, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, the Grantor need not pay any such tax,
assessment or other charge so long as the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted and so long as
security sufficient to pay such tax, assessment or other charge (and any
interest and penalties which may be applicable thereon) has been provided to the
Trustee to protect the Beneficiary and the Trustee. In the event that the
Grantor shall fail to pay any such tax, assessment or other charge (and shall
not be so contesting it) or to discharge any such lien, the Beneficiary may, at
its option, but shall not be required to, make any payments necessary to pay
such tax, assessment or other
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charge and/or to discharge such lien, and the Grantor shall, upon demand,
reimburse the Beneficiary for the full amount of such payments (together with
interest from the date paid to but not including the date reimbursed at, a
fluctuating rate per annum equal to the prime rate as announced by the Trustee
from time to time). The Trustee shall not be responsible for paying any taxes,
assessments or other charges or discharging liens on the Reserve Trust Account
or any of the Assets thereof.
(b) The parties hereto intend that at and after the Effective Time the Reserve
Trust Account be classified for United States federal income tax purposes as a
grantor trust (pursuant to sections 671 through 677 of the Internal Revenue Code
of 1986, as amended). Each party hereto agrees at and after the Effective Time
to treat the Reserve Trust Account as a grantor trust and the Grantor as the
owner of the Assets for all United States federal, state and local tax purposes
and, thus, any and all income derived from the Assets held in the Reserve Trust
Account shall constitute income or gain of the Grantor as owner of such Assets.
The Trustee shall not be authorized or empowered to do anything that would cause
the Reserve Trust Account to fail to qualify as a grantor trust or the Grantor
to fail to be treated as the owner of the Assets for such tax purposes at and
after the Effective Time. The Grantor shall be responsible for any tax reporting
(including filing of any income tax returns and, if applicable, obtaining tax
identification numbers) required on behalf of the Reserve Trust Account with
respect to all periods beginning at and after the Effective Time and shall
notify the Trustee of the tax identification number of the Reserve Trust
Account.
(c) The Trustee will transmit to the Grantor and or its designee upon receipt,
and will instruct any entities authorized to hold Assets in accordance with the
terms hereof to transmit to the Grantor upon receipt, all financial reports,
stockholder communications, notices, proxies and proxy soliciting materials
received from issuers of Assets, and all information relating to exchange or
tender offers received from offerors with respect to such Assets. The Grantor
and/or its designee shall have the full unqualified right to vote and execute
consents, amendments and waivers and to exercise any and all proprietary rights
not inconsistent with this Agreement with respect to any securities or other
property forming a part of the Reserve Trust Account.
SECTION 7. ADDITIONAL RIGHTS AND DUTIES OF THE TRUSTEE.
(a) The Trustee shall furnish to the Grantor and the Beneficiary a statement of
all Assets in the Reserve Trust Account upon the inception of the Reserve Trust
Account and at the end of each calendar month thereafter (the "Monthly
Statement"). The Monthly Statement shall list all of the Assets and shall be
given as soon as practicable, but in no event later than ten (10) Business Days
after the end of the calendar month most recently concluded. The Trustee shall
also provide the Grantor and the Beneficiary with access to the Trustee's
on-line electronic account reporting system to allow them to view the status of
and activities in the Reserve Trust Account.
(b) Before accepting any asset for deposit to the Reserve Trust Account, the
Trustee shall determine that such asset is in such form that the Beneficiary
whenever necessary may, or the Trustee upon written direction by the Beneficiary
may, negotiate such asset without consent or signature from the Grantor or any
other Person.
(c) The Trustee shall notify the Grantor and the Beneficiary, within ten (10)
days, of any deposits to or withdrawals from the Reserve Trust Account. The
Trustee will be deemed to have delivered the notices of deposits to or
withdrawals from the Reserve Trust Account if such notice is available on one or
more of the Trustee's systems to deliver electronic media.
(d) All Assets shall be safely held by the Trustee in its office in the United
States, except that the Trustee may hold any Asset that is in book-entry form as
of the date it is credited to the Reserve Trust Account (a "Book-Entry Asset")
through the book-entry account maintained by the Trustee with the related
depository for such Book-Entry Asset (such a depository being referred to herein
as a "Depository"). A Book-Entry Asset may be held in the name of a nominee
maintained by the Depository.
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(e) The Trustee shall accept and may open all mail directed to the Grantor or
the Beneficiary in care of the Trustee. The Trustee shall promptly forward all
mail to the addressee whether or not opened.
(f) The Trustee shall keep full and complete records of the administration of
the Reserve Trust Account. Upon the reasonable written request of the Grantor or
the Beneficiary, the Trustee shall promptly permit the Grantor or the
Beneficiary, their respective agents, employees or independent auditors to
examine, audit, excerpt, transcribe and copy, at their own expense, during the
Trustee's normal business hours any books, documents, papers and records
relating to the Reserve Trust Account or the Assets.
(g) The Trustee is authorized to rely conclusively upon all Communications
(including, without limitation, Investment Orders, Beneficiary Withdrawal
Notices, Grantor Withdrawal Notices and Termination Notices) given by officers,
agents and/or employees named in letters and incumbency certificates furnished
to the Trustee from time to time by the Grantor or the Beneficiary and by
attorneys-in-fact acting under written authority furnished to the Trustee by the
Grantor or the Beneficiary (collectively "Instructions"), including Instructions
given by letter, facsimile transmission or electronic mail or other electronic
media, if the Trustee reasonably believes such Instructions to be genuine and to
have been signed, sent or presented by the proper party or parties. The Trustee
shall not incur any liability to anyone resulting from actions taken by the
Trustee in reliance in good faith without negligence or willful misconduct on
such Instructions. The Trustee shall not incur any liability in executing
Instructions prior to receipt by it of (i) notice of the revocation of the
written authority of the individual(s) named therein or (ii) notice from any
officer, agent or employee of the Grantor or the Beneficiary named in a letter
or incumbency certificate delivered hereunder prior to receipt by it of a more
current certificate.
(h) The duties and obligations of the Trustee shall only be such as are
specifically set forth in this Agreement, as it may from time to time be amended
in accordance with the terms hereof, and no implied duties or obligations shall
be read into this Agreement against the Trustee. The Trustee shall be liable
only for its own negligence, willful misconduct or lack of good faith. Subject
to the preceding sentence, the Trustee is not liable (i) for acting in
accordance with or relying upon any instruction, notice, demand, certificate or
document
12
contemplated by and given in accordance with this Agreement from the Grantor or
the Beneficiary, or (ii) for any consequential, punitive or special damages.
(i) No provision of this Agreement shall require the Trustee to take any action
which, in the Trustee's reasonable judgment, would result in any violation of
this Agreement or any provision of law. The Trustee shall exercise the same due
care that is expected of a fiduciary with the responsibility for the
safeguarding of the Assets in the Reserve Trust Account and for compliance with
all provisions of this Agreement, whether or not the Assets are in the Trustee's
possession.
(j) The Trustee may confer with a nationally recognized outside law firm of its
selection in relation to matters arising under this Agreement. The written
opinion of such law firm shall be full and complete authority and protection for
the Trustee with respect to any action taken, omitted or suffered by it in good
faith and in accordance with the opinion of such law firm.
(k) The parties hereto acknowledge that nothing in this Agreement shall obligate
the Trustee to extend credit, grant financial accommodation or otherwise advance
moneys for the purpose of making any payments or part thereof or otherwise
carrying out any Instructions, including, without limitation, any Investment
Order.
(l) The Trustee hereby waives any right of counterclaim, banker's lien, liens or
perfection rights as securities intermediary with respect to the Assets and the
Reserve Trust Account.
SECTION 8. THE TRUSTEE'S COMPENSATION, EXPENSES AND INDEMNIFICATION.
(a) The Grantor shall pay the Trustee, as compensation for its services under
this Agreement, a fee computed at its usual and customary rates for services of
this sort, as determined in good faith by the Trustee from time to time and
communicated to and agreed to in writing by the Grantor. The Grantor shall also
pay or reimburse the Trustee for all of the Trustee's expenses and disbursements
in connection with its duties under this Agreement (including reasonable
attorneys' fees and expenses and reasonable accounting and consulting fees and
expenses, in addition to the legal and administrative expenses and fees related
to the preparation, filing and maintenance of the UCC financing statements
referred to in Section 1(d) above), except any such expense or disbursement as
may arise from the Trustee's negligence, willful misconduct or lack of good
faith. The Trustee shall be entitled to deduct its compensation and expenses
solely from payments of dividends and interest in respect of the assets held in
the Income Account as provided in Section 5 of this Agreement.
(b) The Grantor hereby indemnifies the Trustee for, and holds it harmless
against, any losses (including reasonable attorneys' fees and expenses and
reasonable consulting and accountants' fees and expenses) incurred or paid
(other than as a result of the Trustee's negligence, willful misconduct or lack
of good faith), arising out of or in connection with the performance of its
duties and obligations under this Agreement, including without limitation any
loss arising out of or in connection with the status of the Trustee in
connection with the performance of its duties and any nominee as the holder of
record of any of all of the Assets. In addition to and not in limitation of the
foregoing, the Beneficiary hereby indemnifies the Trustee
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for, and holds it harmless against, any loss, liability, costs or expenses
(including attorney's fees and expenses) incurred or made without negligence,
willful misconduct or lack of good faith on the part of the Trustee, arising out
of or in connection with actions taken by the Trustee pursuant to any written
instruction from the Beneficiary to perform any such action. The Grantor and the
Beneficiary each hereby acknowledge that the foregoing indemnities shall survive
the resignation of the Trustee or the termination of this Agreement.
(c) No Assets shall be withdrawn from the Reserve Trust Account or used in any
manner for paying compensation to, or reimbursement or indemnification of, the
Trustee except as set forth in Section 5.
(d) The Trustee hereby waives any and all rights of offset, counterclaim and
recoupment against the Beneficiary and Reserve Trust Account, and waives any
lien (statutory or otherwise) that it may assert against the Reserve Trust
Account.
SECTION 9. RESIGNATION OF THE TRUSTEE.
(a) The Trustee may resign at any time by giving not less than ninety (90) days'
written notice thereof to the Beneficiary and to the Grantor, such resignation
to become effective on the acceptance of appointment by a successor trustee and
the transfer to such successor trustee of all Assets in the Reserve Trust
Account in accordance with paragraph (b) of this Section 9. The Grantor and the
Beneficiary jointly also may remove the Trustee at any time, without assigning
any reason therefor, on fifteen (15) days' prior written notice thereof to the
Trustee.
(b) Upon receipt of the Trustee's notice of resignation or notice to the Trustee
of removal, the Grantor and the Beneficiary shall promptly appoint a successor
trustee. Any successor trustee shall be a bank that is a member of the Federal
Reserve System and shall not be a parent, a subsidiary or an affiliate of the
Grantor or the Beneficiary. If a successor trustee has not accepted such
appointment within thirty (30) days after the notice of resignation or removal,
the Trustee may, in its sole discretion, apply at the expense of the Grantor to
a court of competent jurisdiction for the appointment of a successor trustee or
for other appropriate relief. The costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the Trustee in connection with such
proceeding shall be paid by, and be deemed an obligation of, the Grantor. Upon
the acceptance of the appointment as trustee hereunder by a successor trustee,
such successor trustee shall succeed to and become vested with all the rights,
powers, privileges and duties of the Trustee, and the Trustee shall be
discharged from any future duties and obligations under this Agreement, but the
Trustee shall continue after its resignation to be entitled to the benefits of
the indemnities provided herein for a Trustee.
SECTION 10. TRIGGERING EVENT.
(a) Notwithstanding anything in this Agreement to the contrary, in the event
that the Beneficiary provides a written certification to the Trustee of the
occurrence of a Triggering Event, upon receipt of such certification by the
Trustee, the provisions of Sections 2(b), 2(c) and 4(c) hereof shall no longer
be effective and shall be replaced with the following provisions, effective
immediately without any further action by any party:
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(i) Section 2(b) shall be replaced with the following:
If the aggregate Fair Market Value of the Eligible Assets in the
Reserve Trust Account at the end of any Accounting Period exceeds one
hundred and two percent (102%) of the Required Balance, the Grantor
may provide notice to the Beneficiary, with a copy to the Trustee, of
its desire to withdraw Assets from the Reserve Trust Account in an
amount not to exceed such excess, specifying the amount and type of
Assets to be withdrawn. Within five (5) Business Days following its
delivery of such notice to the Beneficiary, the Grantor shall be
permitted, without further notice to, or consent of, the Beneficiary,
to direct the Trustee to withdraw Assets from the Reserve Trust
Account in excess of one hundred and two percent (102%) of the amount
necessary to maintain such Required Balance as of the end of the
applicable Accounting Period, which notice shall be substantially in
the form attached hereto as Exhibit B-2 (a "Grantor Withdrawal
Notice"). The Grantor Withdrawal Notice shall specify the invested
Assets or cash amount to be withdrawn.
(ii) Section 2(c) shall be replaced with the following:
At any time and from time to time, the Grantor may withdraw, upon
providing to the Beneficiary and the Trustee the Grantor Withdrawal
Notice, such Assets from the Reserve Trust Account as are specified in
such Grantor Withdrawal Notice for the sole purpose of paying the
General Account Liabilities under the Covered Insurance Policies;
provided, the aggregate Fair Market Value of the Assets maintained in
the Reserve Trust Account as of any Accounting Period end is equal to
or greater than the Required Balance. The Grantor need present no
statement or document other than a Grantor Withdrawal Notice in order
to withdraw any Assets.
(iii) Section 4(c) shall be replaced with the following:
From time to time, and upon the prior written notice to the
Beneficiary, the Grantor may direct the Trustee to substitute Assets,
provided, that at the time of such substitution, the withdrawn Assets
are replaced with other Eligible Assets having a Fair Market Value at
least equal to the Fair Market Value of the Assets withdrawn. The
Trustee shall have no responsibility whatsoever to determine the value
of such substituted Assets or that such substituted Assets constitute
Eligible Assets.
(b) Notwithstanding the foregoing, the Reserve Trust Account created hereunder
shall continue in existence following the occurrence of a Triggering Event.
Following the occurrence of a Triggering Event, the Grantor shall ensure that
the Assets in the Reserve Trust Account have an aggregate Fair Market Value at
least equal to the Required Balance within five (5) Business Days following the
applicable RBC Reporting Deadline related to such Triggering Event.
(c) Notwithstanding anything in this Agreement to the contrary, in the event
that the Grantor provides a Cure Notice substantially in the form attached
hereto as Exhibit D (a "Cure Notice") to the Trustee and the Beneficiary, which
Cure Notice has been agreed to and acknowledged by the Beneficiary, such
agreement and acknowledgment not to be unreasonably withheld, conditioned or
delayed, as evidenced by its execution and delivery to the Trustee and the
Grantor of a Cure Acknowledgment substantially in the form attached hereto as
Exhibit E (a "Cure Acknowledgment"), then upon receipt of such Cure
Acknowledgment by the Trustee, the provisions
15
of Sections 2(b), 2(c) and 4(c) hereof shall revert back to their original form
effective immediately without any further action by any party, such that the
replacements effected pursuant to Section 10(a) shall no longer be effective.
(d) If the Beneficiary shall dispute the Grantor's valuation of any Asset, and
the parties are unable to resolve such dispute within ten (10) days, the Fair
Market Value of such Asset shall be the amount determined by a Third Party
Appraiser and the parties shall be bound by such valuation. All fees, costs and
expenses relating to the foregoing work by any Third Party Appraiser shall be
shared equally by the Beneficiary and the Grantor.
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SECTION 11. RESERVE CREDIT EVENT
(a) Notwithstanding anything in this Agreement to the contrary, in the event
that the Beneficiary provides a written certification to the Trustee of the
occurrence of a Reserve Credit Event, upon receipt of such certification by the
Trustee, the provisions of Sections 2(a), 2(b) and 4(c) hereof shall no longer
be effective and shall be replaced with the following provisions, effective
immediately without any further action by any party:
(i) Section 2(a) shall be replaced with the following:
The Beneficiary shall have the right to withdraw Assets from the
Reserve Trust Account at any time and from time to time, without
notice to the Grantor, subject only to delivery of written notice to
the Trustee (the "Beneficiary Withdrawal Notice") in a form attached
hereto as Exhibit B-1, specifying the invested Assets or cash amount
to be withdrawn. The Beneficiary may designate in the Beneficiary
Withdrawal Notice a third party (the "Designee") to whom Assets
specified therein shall be delivered and may condition delivery of
such Assets to such Designee upon receipt and deposit to the Reserve
Trust Account of other Assets specified in such Beneficiary Withdrawal
Notice. The Beneficiary need present no statement or document other
than the Beneficiary Withdrawal Notice in order to withdraw any
Assets, provided, the Beneficiary may be requested to acknowledge
receipt of such withdrawn Assets. The Beneficiary may only use and
apply invested Assets or amounts drawn upon the Reserve Trust Account,
without diminution because of the insolvency of the Beneficiary or the
Grantor for one or more of the purposes set forth in Section 4.2(c) of
the Reinsurance Agreement.
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(ii) Section 2(b) shall be replaced with the following:
If the aggregate Fair Market Value of the Eligible Assets in the
Reserve Trust Account at the end of any Accounting Period exceeds one
hundred and two percent (102%) of the Required Balance, the Grantor
may, with the prior written consent of the Beneficiary substantially
in the form attached hereto as Exhibit B-3 (the "Grantor Withdrawal
Consent Notice"), provide notice to the Trustee of its desire to
withdraw Assets from the Reserve Trust Account in an amount not to
exceed such excess, specifying the amount and type of Assets to be
withdrawn. Within five (5) Business Days following its delivery of
such notice to the Beneficiary and the Trustee and the receipt by the
Trustee of the Grantor Withdrawal Consent Notice, the Grantor shall be
permitted to direct the Trustee to withdraw Assets from the Reserve
Trust Account in excess of one hundred and two percent (102%) of the
amount necessary to maintain such Required Balance as of the end of
the applicable Accounting Period, which notice shall be substantially
in the form attached hereto as Exhibit B-2 (a "Grantor Withdrawal
Notice"). The Grantor Withdrawal Notice shall specify the invested
Assets or cash amount to be withdrawn.
(iii) Section 4(c) shall be replaced with the following:
From time to time, subject to the prior written approval of the
Beneficiary, the Grantor may direct the Trustee to substitute Assets,
provided, that at the time of such substitution, the withdrawn Assets
are replaced with other Eligible Assets having a Fair Market Value at
least equal to the Fair Market Value of the Assets withdrawn. The
Trustee shall have no responsibility whatsoever to determine the value
of such substituted Assets or that such substituted Assets constitute
Eligible Assets.
(iv) Section 2(c) shall be deleted in its entirety.
(b) Notwithstanding the foregoing, the Reserve Trust Account created hereunder
shall continue in existence following the occurrence of a Reserve Credit Event.
Following the occurrence of a Reserve Credit Event, the Grantor shall ensure
that the Assets in the Reserve Trust Account have an aggregate Fair Market Value
at least equal to the Required Balance within five (5) Business Days following
the Reserve Credit Event.
(c) Notwithstanding anything in this Agreement to the contrary, in the event
that the Grantor provides a Cure Notice to the Trustee and the Beneficiary,
which Cure Notice has been agreed to and acknowledged by the Beneficiary, such
agreement and acknowledgment not to be unreasonably withheld, conditioned or
delayed, as evidenced by its execution and delivery to the Trustee and the
Grantor of a Cure Acknowledgment, then upon receipt of such Cure Acknowledgment
by the Trustee, the provisions of Sections 2(a), 2(b), 2(c) and 4(c) hereof
shall revert back to their original form effective immediately without any
further action by any party, such that the replacements effected pursuant to
Section 11(a) shall no longer be effective.
(d) If the Beneficiary shall dispute the Grantor's valuation of any Asset, and
the parties are unable to resolve such dispute within ten (10) days, the Fair
Market Value of such Asset shall be the amount determined by a Third Party
Appraiser and the parties shall be bound
18
by such valuation. All fees, costs and expenses relating to the foregoing work
by any Third Party Appraiser shall be shared equally by the Beneficiary and the
Grantor.
SECTION 12. TERMINATION OF THE RESERVE TRUST ACCOUNT.
(a) The Reserve Trust Account and this Agreement, except for the indemnities
provided herein, which shall survive termination, may be terminated, other than
pursuant to an order of a court having jurisdiction, only after (i) the Grantor
has given the Trustee written notice of its intention to terminate the Reserve
Trust Account (the "Notice of Intention"), and (ii) the Trustee has given the
Grantor and the Beneficiary the written notice specified in paragraph (b) of
this Section 12. The Notice of Intention shall specify the date on which the
Grantor intends the Reserve Trust Account to terminate (the "Proposed Date").
(b) Within ten (10) Business Days following receipt by the Trustee of the Notice
of Intention, the Trustee shall give at least thirty (30) days written notice
(the "Termination Notice") to the Beneficiary and the Grantor of the date (the
"Termination Date") on which the Reserve Trust Account shall terminate. The
Termination Date shall be (a) the Proposed Date (or if not a Business Day, the
next Business Day thereafter), if the Proposed Date is at least thirty (30) days
but no more than forty-five (45) days subsequent to the date the Termination
Notice is given, (b) thirty (30) days subsequent to the date the Termination
Notice is given (or if not a Business Day, the next Business Day thereafter), if
the Proposed Date is less than thirty (30) days subsequent to the date the
Termination Notice is given; or (c) forty-five (45) days subsequent to the date
the Termination Notice is given (or if not a Business Day, the next Business Day
thereafter), if the Proposed Date is more than forty-five (45) days subsequent
to the date the Termination Notice is given.
(c) On the Termination Date, after satisfaction of any outstanding Beneficiary
Withdrawal Notices, and upon receipt of written certification of the Beneficiary
that it consents to such termination, the Trustee shall transfer any Assets
remaining in the Reserve Trust Account to the Grantor, at which time all duties
and obligations of the Trustee with respect to such Assets shall cease.
SECTION 13. DEFINITIONS.
Except as the context shall otherwise require, the following terms shall have
the following meanings for all purposes of this Agreement (the definitions to be
applicable to both the singular and the plural forms of each term defined if
both such forms of such term are used in this Agreement):
The term "Accounting Period" shall mean each calendar quarter during the term of
this Agreement or any fraction thereof ending on the Termination Date.
The term "Action" shall mean any claim, litigation, action, suit, investigation,
inquiry, hearing, charge, complaint, demand, arbitration or proceeding by or
before any Governmental Body.
The term "Administrative Services Agreement" shall mean the administrative
services agreement being entered into by the Grantor and the Beneficiary as of
January 1, 2013.
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The term "Affiliate" with respect to any Person shall mean any other Person that
directly or indirectly controls, is controlled by or is under common control
with such Person. As used in this definition, the term "controls" (including the
terms "controlled by" and "under common control with") means the relevant Person
has possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
The term "Agreement" shall have the meaning specified in the preamble.
The term "Applicable Law" shall mean any law, treaty, convention, code, statute,
ordinance, directive, rule, regulation, common law, decree or binding agency
requirement imposed by any Governmental Body applicable to the Person, place or
situation in question.
The term "Assets" shall have the meaning specified in Section 1(b) of this
Agreement.
The term "Beneficiary" shall have the meaning specified in the preamble.
The term "Beneficiary Withdrawal Notice" shall have the meaning specified in
Section 2(a) of this Agreement.
The term "Book-Entry Asset" shall have the meaning specified in Section 7(d) of
this Agreement.
The term "Business" shall have the meaning specified in the Purchase Agreement.
The term "Business Day" shall mean any day that is not a Saturday, Sunday, legal
holiday or other day on which commercial banks in New York, New York are
authorized or required by Applicable Law to be closed.
The term "Collateral" shall have the meaning specified in Section 1(d) of this
Agreement.
The term "Communications" shall have the meaning specified in Section 3(a) of
this Agreement.
The term "Company Action Level RBC" shall mean, at any date of determination,
two hundred percent (200%) of the authorized control level risk based capital of
the Grantor determined in accordance with the Applicable Law of the state of
domicile of the Grantor.
The term "Connecticut Insurance Code" shall mean Title 38a of the General
Statutes of Connecticut.
The term "Connecticut Insurance Regulations" shall mean Title 38a of the
Regulations of Connecticut State Agencies.
The term "Cure Acknowledgment" shall have the meaning specified in Section 10(c)
of this Agreement.
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The term "Cure Notice" shall have the meaning specified in Section 10(c) of this
Agreement.
The term "Depository" shall have the meaning specified in Section 7(d) of this
Agreement.
The term "Designee" shall have the meaning specified in Section 2(a) of this
Agreement.
The term "Effective Time" shall mean 12:00:01 a.m., New York City time, on
January 1, 2013.
The term "Eligible Assets" shall mean cash, certificates of deposit issued by a
United States bank and payable in United States dollars and investments of the
type permitted by Connecticut Insurance Regulations Section Section 38a-88-6 and
38a-88-7 or any successor provision (or the relevant provisions of such other
state in which the Beneficiary is domiciled at a given time) and all other
Applicable Laws that would govern the permitted assets for the Reserve Trust
Account; provided, that (i) each such investment that is a security is issued by
an institution that is not the Beneficiary, the Grantor or an Affiliate of
either party, and (ii) such investments comply with the requirements specified
by the Investment Guidelines.
The term "Entitlement Order" shall mean "entitlement order" as defined in the
UCC.
The term "Fair Market Value" shall mean the fair market value of such Asset as
calculated by the Grantor. In providing this calculation, the Grantor shall use
prices published by a nationally recognized pricing service for assets for which
such prices are available, and for assets for which such prices are not
available, the Grantor shall use methodologies consistent with those which it
uses for determining the fair market value of assets held in its own general
account (other than the Assets) in the ordinary course of business.
The term "Governmental Body" shall mean any foreign, federal, state, local or
other governmental, legislative, judicial, administrative or regulatory
authority, agency, commission, board, body, court or entity or any
instrumentality thereof or any self-regulatory body or arbitral body or
arbitrator.
The term "Grantor" shall have the meaning specified in the preamble.
The term "Grantor Withdrawal Consent Notice" shall have the meaning specified in
Section 2(b) of this Agreement.
The term "Grantor Withdrawal Notice" shall have the meaning specified in Section
2(b) of this Agreement.
The term "Income" shall have the meaning specified in Section 5 of this
Agreement.
21
The term "Income Account" shall have the meaning specified in Section 5 of this
Agreement.
The term "Instructions" shall have the meaning specified in Section 7(g) of this
Agreement.
The term "Investment Guidelines" shall mean the Investment Guidelines attached
hereto as Exhibit C.
The term "Investment Order" shall have the meaning specified in Section 4(d) of
this Agreement.
The term "Monthly Statement" shall have the meaning specified in Section 7(a) of
this Agreement.
The term "Moody's" shall mean Moody's Investors Service, Inc., or any successor
thereto.
The term "Notice of Intention" shall have the meaning specified in Section 12(a)
of this Agreement.
The term "Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or Governmental Body or other entity.
The term "Purchase Agreement" shall mean the Purchase and Sale Agreement, dated
September 4, 2012, pursuant to which Hartford Life, Inc. has agreed to sell, and
the Grantor has agreed to purchase, the Business and certain assets of Hartford
Life, Inc. and its Affiliates.
The term "Proposed Date" shall have the meaning specified in Section 12(a) of
this Agreement.
The term "RBC Ratio" shall mean, with respect to the Grantor, the percentage
equal to (i) the quotient of the Total Adjusted Capital of the Grantor DIVIDED
by the Company Action Level RBC, MULTIPLIED by (ii) 100.
The term "RBC Reporting Deadline" shall mean, as of any date, the date that is
either: (i) sixty (60) calendar days after the end of each calendar year, or
(ii) forty-five (45) calendar days after the end of any calendar quarter other
than the calendar quarter ending on December 31.
The term "Reinsurance Agreement" shall have the meaning specified in the
preamble.
The term "Representative" of a Person shall mean the directors, officers,
employees, advisors, agents, consultants, independent accountants, investment
bankers, counsel or other representatives of such Person and of such Person's
Affiliates.
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The term "Reserve Trust Account" shall have the meaning specified in the
preamble.
The term "Reserve Credit" means full statutory financial statement credit for
the reinsurance ceded to the Grantor under the Reinsurance Agreement in the
Beneficiary's NAIC Annual Statement Blank and in all statutory financial
statements of the Beneficiary required to be filed with the Governmental Body
charged with supervision of insurance companies in the State of Connecticut.
The term "Reserve Credit Event" means any event that would cause the Beneficiary
to not be permitted to receive Reserve Credit on any of its statutory financial
statements provided that such event has not been remedied prior to the last
calendar day of the calendar quarter in which such event occurs.
The term "S&P" shall mean Standard & Poor's Ratings Services, a Standard &
Poor's Financial Services LLC business, or any successor thereto.
The term "Security Entitlement" shall mean "security entitlement" as defined in
the UCC.
The term "Statutory Book Value" shall mean, with respect to any Eligible Asset,
the dollar amount thereof stated on the statutory financial statements as
admitted assets of the Grantor, as determined in accordance with the statutory
accounting requirements in the Grantor's state of domicile, but disregarding any
prescribed or permitted practices applicable to the Grantor.
The term "Termination Date" shall have the meaning specified in Section 12(b) of
this Agreement.
The term "Termination Notice" shall have the meaning specified in Section 12(b)
of this Agreement.
The term "Third Party Appraiser" shall mean a nationally recognized independent
appraisal firm which is mutually acceptable to the Grantor and the Beneficiary
or, if the Grantor and the Beneficiary are unable to agree on such an appraisal
firm, an independent appraisal firm selected by mutual agreement of the
Grantor's and the Beneficiary's independent accountants.
The term "Triggering Event" shall mean means either of the following
occurrences:
(a) the Grantor's RBC Ratio falls below 300% as of a quarter-end and the Grantor
has not cured such shortfall as of the applicable RBC Reporting Deadline;
provided, that in the event there is a material change in the factors and
formulae prescribed by the insurance regulatory authority in the Grantor's state
of domicile with respect to the components of and methodologies contained in
such calculation, the parties hereto shall amend this Agreement to incorporate
an alternate calculation that is reasonably equivalent to the components of and
methodologies contained in the calculation of the Grantor's RBC Ratio in effect
as of the date of execution of this Agreement within thirty (30) calendar days
after
23
the implementation of such change, and if the parties hereto cannot agree on any
such alternative, the Grantor shall continue to calculate its RBC Ratio as if
such material change had not occurred; or
(b) on any day occurring after a Trust Withdrawal Event Notice has been
delivered to the Trustee, the financial strength rating of the Grantor falls
below "BBB" as rated by S&P and "Baa2" as rated by Moody's.
The term "Total Adjusted Capital" shall mean, 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.
The term "Trustee" shall have the meaning specified in the preamble.
The term "Trust Withdrawal Event Acknowledgment" shall have the meaning
specified in Section 2(d) of this Agreement.
The term "Trust Withdrawal Event Notice" shall have the meaning specified in
Section 2(d) of this Agreement.
The term "UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the Beneficiary's state of domicile.
SECTION 14. REMEDIES.
Each party agrees that any failure to perform, or breach of its obligations
under this Agreement will result in irreparable injury to the other party, that
the remedies available to such other party at law alone will be an inadequate
remedy for such failure or breach and that, in addition to any other legal or
equitable remedies that such other party may have, such other party may seek to
enforce its rights in court by an Action for specific performance and the
parties expressly waive the defense that a remedy in damages will be adequate or
that an award of specific performance is not an appropriate remedy for any
reason at law or equity. Any party seeking an order or injunction to prevent or
cure breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement shall not be required to provide any bond or other
security in connection with any such order or injunction. The parties further
agree that (a) by seeking any remedy provided for in this Section 14, a party
shall not in any respect waive its right to seek any other form of relief that
may be available to such party under this Agreement and (b) nothing contained in
this Section 14 shall require any party to institute any action for (or limit
any party's right to institute any action for) specific performance under this
Section 14 before exercising any other right under this Agreement.
SECTION 15. GOVERNING LAW.
This Agreement and the Reserve Trust Account shall be governed by and construed
in accordance with the laws of the State of Connecticut (without regard to
conflict of laws principles that might lead to the application of the laws of
another jurisdiction). Regardless of any provision in any other agreement, for
purposes of the UCC, the State of New York shall
24
be deemed to be the "securities intermediary's jurisdiction" (as defined in
Section 8-110(e) of the UCC) of the Trustee.
SECTION 16. JURISDICTION; VENUE.
Each of the parties hereto irrevocably agrees that any and all Actions arising
out of, relating to or in connection with this Agreement or the transactions
contemplated by this Agreement or the formation, breach, termination or validity
of this Agreement brought by the other party hereto or its successors or
assigns, shall be brought and determined exclusively in the in any district
court of the United States of America located in the State of Connecticut, or,
in the event that such courts do not have subject matter jurisdiction over such
Action, in the courts of the State of Connecticut. Each of the parties agrees
that mailing of process or other papers in connection with any such Action in
the manner provided in Section 18, or in such other manner as may be permitted
by Applicable Law, will be valid and sufficient service thereof. Each of the
parties hereto hereby irrevocably submits with regard to any such Action for
itself and in respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any Action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court or tribunal other than the aforesaid courts. Each of
the parties hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any Action with respect
to this Agreement or the transactions contemplated by this Agreement or the
formation, breach, termination or validity of this Agreement (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 should be dismissed on the basis of FORUM NON CONVENIENS, (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.
SECTION 17. JURY WAIVER.
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 17.
SECTION 18. NOTICES.
All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given (a) on the date
of service if served personally on the party to whom notice is to be given, (b)
on the day of transmission if sent via facsimile transmission to the facsimile
number given below, and telephonic confirmation
25
of receipt is obtained promptly after completion of transmission, (c) on the day
of transmission if sent via electronic mail to the email address given below,
and telephonic confirmation of receipt is obtained promptly after completion of
transmission, or (d) on the second 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:
(a) If to the Grantor, to:
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
Attention: Elaine Sarsynski
Facsimile: 413-744-1177
Email: esarsynski@massmutual.com
with copies to (which shall not constitute notice):
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, Massachusetts 01111
Attention: General Counsel
Facsimile: 413-226-4134
Email: mroellig49@massmutual.com
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Attention: Robert J. Sullivan
J. Stephanie Nam
Facsimile: 212-735-2000
Email: robert.sullivan@skadden.com
stephanie.nam@skadden.com
(b) If to the Beneficiary, to:
Hartford Life Insurance Company
200 Hopmeadow Street
Simsbury, CT 06089
Attention: Ceded Reinsurance & General Counsel
Facsimile: (866) 522-0308
Email: james.heavner@thehartford.com
alan.kreczko@thehartford.com
with a copy to (which shall not constitute notice):
Sidley Austin LLP
1 South Dearborn
Chicago, Illinois 60603
26
Attention: Perry J. Shwachman
Sean M. Keyvan
Facsimile: (312) 853-7036
Email: pshwachman@sidley.com
skeyvan@sidley.com
(c) If to the Trustee, to:
Citibank, N.A.
Insurance Trust Product Management
388 Greenwich Street
New York, NY 10013
Attention: Elizabeth O'Dea
Telephone: (212) 816-8764
Email: elizabeth.o'dea@citi.com
with a copy to (which shall not constitute notice):
Citibank, N.A.
Trust and Custody Operations
480 Washington Boulevard, 30th Floor
Jersey City, NJ 07310
Attention: William Mulrenin
Telephone: 973-461-7017
Facsimile: 973-461-7193
Email: william.mulrenin@citi.com
or to such other address as such party may indicate by a notice delivered to the
other party hereto in accordance with this Section 18.
SECTION 19. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
(a) The rights and obligations of a party under this Agreement shall not be
assignable or delegable by such party without the written consent of the other
parties.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their successors and permitted assigns. 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
assigns permitted by this Section 19 any right, remedy or claim under or by
reason of this Agreement.
SECTION 20. ENTIRE AGREEMENT; AMENDMENTS.
(a) This Agreement, the Exhibits referred to herein and the Reinsurance
Agreement contain the entire understanding of the parties hereto with regard to
the subject matter contained herein or therein, and supersede all other prior
representations, warranties, agreements, understandings or letters of intent
between or among any of the parties which representations,
27
warranties, agreements, understandings or letters of intent shall be of no force
or effect for any purpose and shall be interpreted without reference to any
prior drafts hereof.
(b) 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 21. INTERPRETATION.
The table of contents, titles and headings to sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. The Exhibits referred to herein
shall be construed with and as an integral part of this Agreement to the same
extent as if they were set forth verbatim herein. All references herein to
Sections and Exhibits shall be construed to refer to Sections of, and Exhibits
to, this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Unless the context otherwise requires, the words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein. Subject to Section 18, all
references to "written notice" herein shall include notice by print, fax or
electronic mail. 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. Except as otherwise set forth herein,
any agreement or instrument defined or referred to herein or any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented, including by waiver or consent,
and references to all attachments thereto and instruments incorporated therein.
Any statute or regulation referred to herein means such statute or regulation as
amended, modified, supplemented or replaced from time to time (and, in the case
of any statute, includes any rules and regulations promulgated under such
statute), and references to any section of any statute or regulation include any
successor to such section. Any agreement referred to herein shall include
reference to all Exhibits, Schedules and other documents or agreements attached
thereto. References to dollars or "$" shall mean U.S. dollars. This Agreement
shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted. Each representation, warranty, covenant, agreement and
condition contained in this Agreement shall have independent significance.
SECTION 22. 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
28
such provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any preceding or subsequent breach.
SECTION 23. EXPENSES.
Except as otherwise expressly set forth in this Agreement (including in Section
1(d), Section 8 and Section 9), each party hereto will pay all costs and
expenses incident to its negotiation and preparation of this Agreement and to
its performance and compliance with all agreements and conditions contained
herein on its part to be performed or complied with, including the fees,
expenses and disbursements of its counsel and independent public accountants.
Notwithstanding the foregoing in this Section 23 or in Section 8 above, the
Beneficiary agrees that it shall promptly reimburse the Grantor for 50% of all
fees, expenses and costs of the Trustee in connection with the termination of
the Reserve Trust Account pursuant to Section 1(g) that are paid or reimbursed
to the Trustee by the Grantor.
SECTION 24. PARTIAL INVALIDITY.
Wherever possible, each provision hereof shall be interpreted in such manner as
to be effective and valid under Applicable Law, but in case any one or more of
the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating the remainder of such invalid, illegal or
unenforceable provision or provisions or any other provisions hereof, so long as
the economic or legal substance of the transactions contemplated by this
Agreement is not affected in any manner adverse to any party. Upon such
determination that any provision is invalid, illegal or unenforceable, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the greatest extent possible.
SECTION 25. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in one or more counterparts, including by
facsimile or by electronic delivery in .pdf format, each of which shall be
considered an original instrument, but all of which shall be considered one and
the same agreement, and shall become binding when one or more counterparts have
been signed and delivered by each of the parties hereto.
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.
HARTFORD LIFE INSURANCE
COMPANY
By:
Name:
Title:
[Signatures Continue onto Next Page]
MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
By:
Name:
Title:
[Signatures Continue onto Next Page]
CITIBANK N.A., as Trustee
By:
Name:
Title:
EXHIBIT A
INITIAL TRANSFERRED ASSETS
[SEE ATTACHED]
EXHIBIT B-1
FORM OF BENEFICIARY WITHDRAWAL NOTICE
From: Hartford Life Insurance Company ("Beneficiary")
To: Citibank N.A. (the "Trustee")
Date: [ ]
Re: Trust Agreement dated as of December 31, 2012 among Massachusetts Mutual
Life Insurance Company (the "Grantor"), the Beneficiary, and the Trustee (as
amended, modified or supplemented from time to time, the "Trust Agreement")
Dear Sirs:
We hereby give you notice pursuant to Section 2(a) of the Trust Agreement that
the Beneficiary is entitled to withdraw the [sum of $ ] [following
Assets] from the Reserve Trust Account[, for the following purposes permitted
under Section 2(a) of the Trust Agreement: [SPECIFY BASIS FOR ISSUANCE OF
BENEFICIARY WITHDRAWAL NOTICE]]
[SPECIFY LIST OF ASSETS TO BE WITHDRAWN].
Payment or delivery should be immediately made to [INSERT ACCOUNT INFORMATION]
by the following method: [DESCRIBE METHOD OF CASH TRANSFER AND/OR ASSETS TO BE
WITHDRAWN AND DELIVERY INSTRUCTIONS].
Yours faithfully,
[ ]
For and on behalf of Hartford Life Insurance Company
EXHIBIT B-2
FORM OF GRANTOR WITHDRAWAL NOTICE
From: Massachusetts Mutual Life Insurance Company ("Grantor")
To: Citibank N.A. (the "Trustee") Hartford Life Insurance Company
("Beneficiary")
Date: [ ]
Re: Trust Agreement dated as of December 31, 2012 among the Grantor, the
Beneficiary and the Trustee (as amended, modified or supplemented from time
to time, the "Trust Agreement")
Dear Sirs:
We hereby give you notice pursuant to Section 2[(b)][(c)][(d)] of the Trust
Agreement that the Grantor is entitled to withdraw the [sum of $ ]
[following Assets] from the Reserve Trust Account for the following purposes
permitted under Section 2[(b)][(c)][(d)] of the Trust Agreement:
[SPECIFY BASIS FOR ISSUANCE OF GRANTOR WITHDRAWAL NOTICE]
[SPECIFY LIST OF ASSETS TO BE WITHDRAWN].
[The Grantor hereby certifies to the Trustee and the Beneficiary that the
[Statutory Book Value][Fair Market Value] of the Assets held in the Reserve
Trust Account following such withdrawal will not be less than one hundred and
two percent (102%) of the Required Balance.]
Payment or delivery should be immediately made to [INSERT ACCOUNT INFORMATION]
by the following method: [DESCRIBE METHOD OF CASH TRANSFER AND/OR ASSETS TO BE
WITHDRAWN AND DELIVERY INSTRUCTIONS].
Yours faithfully,
[ ]
For and on behalf of Massachusetts Mutual Life Insurance Company
EXHIBIT B-3
FORM OF GRANTOR WITHDRAWAL CONSENT NOTICE
[TO BE UTILIZED ONLY AFTER A RESERVE CREDIT EVENT]
From: Hartford Life Insurance Company ("Beneficiary")
To: Citibank N.A. (the "Trustee") Massachusetts Mutual Life Insurance Company
("Grantor")
Date: [ ]
Re: Trust Agreement dated as of December 31, 2012 among the Grantor, the
Beneficiary and the Trustee (as amended, modified or supplemented from time
to time, the "Trust Agreement")
Dear Sirs:
Pursuant to that certain Grantor Withdrawal Notice dated as of [ ],
we hereby consent to the withdrawal as further described therein.
Yours faithfully,
[ ]
Hartford Life Insurance Company
EXHIBIT B-4
FORM OF
TRUST WITHDRAWAL EVENT NOTICE
From: Massachusetts Mutual Life Insurance Company ("Reinsurer")
To: Hartford Life Insurance Company ("Ceding Company")
cc: Citibank N.A.
Date: [ ]
Re: Trust Withdrawal Event Notice
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
The Reinsurer hereby certifies to the Ceding Company that as of the date hereof
the Trust Withdrawal Event Conditions are satisfied as follows:
(i) the financial strength of the Reinsurer is [ ] as rated by S&P and [ ] as
rated by Moody's;
(ii) the Reinsurer's RBC Ratio as of the quarter end immediately preceding the
date of this letter was [ ]%;
(iii) the numerical value of the Required Balance is [ ]; and
(iv) no Reserve Credit Event has occurred and is continuing.
[Trust Withdrawal Event Notice to include reasonable supporting documentation.]
This letter shall constitute a "Trust Withdrawal Event Notice" for purposes of
Section 4.10 of the Reinsurance Agreement.
Yours faithfully,
[ ]
-----------------------
For and on behalf of
Massachusetts Mutual Life Insurance Company
EXHIBIT B-5
FORM OF TRUST WITHDRAWAL EVENT ACKNOWLEDGMENT
From: Hartford Life Insurance Company ("Ceding Company")
To: Massachusetts Mutual Life Insurance Company ("Reinsurer")
cc: Citibank N.A.
Date: [ ]
Re: Trust Withdrawal Event Acknowledgment
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby acknowledge and agree with your certification provided in that certain
Trust Withdrawal Event Notice dated as of [ ] that the Trust Withdrawal Event
Conditions are satisfied as of the date of such Trust Withdrawal Event Notice.
Pursuant to Section 4.10 of the Reinsurance Agreement, the Reinsurer is entitled
to withdraw all or any portion of the assets in that certain reserve trust
account established by the Reinsurer for the benefit of the Ceding Company under
the Trust Agreement dated as of December 31, 2012, by and among Citibank N.A.,
the Reinsurer and the Ceding Company.
Yours faithfully,
[ ]
For and on behalf of Hartford Life Insurance Company
EXHIBIT C
TRUST ACCOUNT INVESTMENT GUIDELINES
The following Trust Account Investment Guidelines are effective at all times and
will be monitored monthly. Any changes to the Trust Account Investment
Guidelines must be agreed upon in writing by Beneficiary (as defined below) and
Grantor (as defined below). Reference is made to that certain Reserve Trust
Agreement, dated as of December 31, 2012 (the "Reserve Trust Agreement"), by and
among Massachusetts Mutual Life Insurance Company ("Grantor"), Hartford Life
Insurance Company ("Beneficiary") and Citibank N.A. ("Trustee"). Capitalized
terms used herein shall have the meaning set forth in the Reserve Trust
Agreement.
TRUST ACCOUNT GUIDELINES
- DURATION
The effective duration will be managed to be within a duration of +/- 1.0 years
of a fixed duration target to be provided by Grantor. Grantor shall provide to
the Beneficiary, annually, a report regarding its fixed duration target as well
as an analysis as to the most efficient duration to manage the Trust Account.
Such fixed duration target is subject to Beneficiary's approval (such approval
not to be unreasonably withheld).
While within this permissible duration range, asset duration does not
necessarily need to be actively rebalanced towards the specified duration
target.
- KEY RATE DURATION
A significant portion of the Trust Account will seek to ladder its maturities so
that the assets are managed consistent with liability key rates or specific key
rate duration targets. The key rate duration gaps will remain within 1.0 years
of their targets.
- CONVEXITY
Convexity will be positive.
- ACCOUNT VALUE
Account Value shall mean, prior to a Triggering Event or Reserve Credit Event,
Statutory Book Value, and from and after a Triggering Event or Reserve Credit
Event, Fair Market Value, in each case, as defined in the Reserve Trust
Agreement.
- CREDIT QUALITY
Restrictions on aggregate Account Value exposure by quality are as follows:
EXPOSURE: MAXIMUM:
---------------------------------------------------------------------------------------------------------
"A-" and Above ("NAIC 1") 100% of Exposure
"BBB+", "BBB", "BBB-" ("NAIC 2") 35% of Exposure
Below "BBB-" (BIG) ("NAIC 3" or below) 10% of Exposure, to be reduced by 1% annually
beginning as of January 1, 2013 to 5% of Exposure
not later than January 1, 2017
5% of Exposure after January 1, 2017
Non-Rated (exclusive of Alternative 5% of Exposure
Assets, Common Equity, Real Estate
Debt, Cash and Cash Equivalents)
Alternative Assets (inclusive of Common 5% of Exposure
Equity)
Non-Rated Real Estate Debt 20% of Exposure
Maximum exposures by credit quality will be based on NAIC rating or, if
unavailable, an equivalent rating based on Grantor's internal rating system.
If NAIC rating is not available, maximum exposure will be measured by Grantor
based on effective rating as calculated by Grantor's analytical system. At the
time of writing of this document, a security's effective rating is determined as
follows:
- If rated by all of Moody's, S&P, and Fitch, the median rating will prevail.
- If rated by only two rating agencies, the lower rating will prevail.
- If rated by only one rating agency, that agency's rating will be used.
- If not rated by any agency, Grantor's internal rating will be used.
- SECTOR ALLOCATION GUIDELINES
The table below outlines the permissible sector maximums for the Trust Account
based on percentage of exposure on Account Value basis. Investments in any
assets not included in the Sector Allocation table below are prohibited. All
holdings are to be US Dollar denominated, except for the non-US Dollar
denominated private placement investments set forth in ANNEX A hereto. Use of
leverage is prohibited.
PERMISSIBLE
SECTOR: MAXIMUM:
--------------------------------------------------------------------------------
Alternative Assets (Hedge Funds, Private Equity Funds, and
common equity) 5%
Asset Backed Securities, Collateralized Loan Obligations and
Collateralized Debt Obligations 15%
Bank Loans 5%
Cash and Cash Equivalents 100%
Commercial Mortgage Backed Securities 15%
Commercial Mortgages (excluding B-Notes and Mezzanine Debt
Financing, other than holdings transferred at Closing) 20%
Emerging Markets Debt 5%
High Yield Corporate Debt 5%
Investment Grade Corporate Debt 80%
Municipal Bonds (Tax Exempt) & Sovereign Bonds 10%
Residential Mortgage Backed Securities 20%
US Agency Securities 100%
US Treasury Securities (including STRIPS/TIPS) 100%
There may also be times when allowable asset classes may be held in LLC, LP or
other legal forms. In such cases, if the economics of the asset class are
equivalent to the economics of direct ownership, the alternative ownership form
will be permitted and will be aggregated against the limit for the underlying
assets, provided, however, that the asset owned by the Trust is designated "NAIC
1" or "NAIC 2".
- ISSUER LIMITS
Investments in the obligations of any single issuer, other than Governments or
Government Agencies (which, for the purposes of the Trust Account Investment
Guidelines, shall only include U.S. Treasuries, Resolution Trust Corporation
(Refcorp) bonds and obligations issued by GNMA, FNMA, FHLMC and FHA), shall not
exceed an Account Value equal to the greater of 2% of the aggregate Account
Value of the Trust Account and $15 million.
- ILLIQUID ASSETS
Total exposure to the following sectors will be no greater than 50% of the
exposure on an Account Value basis of the Trust Account:
- Non-AAA or Non-Senior Asset Backed Securities
- Non-AAA or Non-Senior Commercial Mortgage Backed Securities
- Collateralized Debt Obligations
- Collateralized Loan Obligations
- Private Emerging Markets (excluding 144a and Reg S securities)
- Private High Yield Corporates (excluding 144a and Reg S securities)
- Private Investment Grade Corporates (excluding 144a and Reg S securities)
- Alternative Assets
- Bank Loans
- Commercial Mortgages
In any event, no more than 40% of the Account Value of the Trust Account will be
classified Level 3 Fair Value as defined by FASB Accounting Standards
Codification 820, FAIR VALUE MEASUREMENT.
VIOLATION RESOLUTION PROCESS
- PRIOR TO A TRIGGERING EVENT OR RESERVE CREDIT EVENT
Upon identification of a violation of the Trust Account Investment Guidelines,
Grantor will determine if the violation is passive or active. A passive
violation may result from changes in the Account Value of the account, a
downgrade of a security or the restructuring of an asset by a person other than
Grantor or its Affiliates. If the Trust Account Investment Guidelines are
passively violated, sales will not be required to bring the Trust Account back
into compliance. Purchases, however, cannot be made that cause the Trust Account
to further violate the Trust Account Investment Guidelines. Grantor will report
the passive violation to Beneficiary no later than five (5) business days after
identification of the violation. Grantor will correct the violation within
ninety (90) days of such violation or receive approval from Beneficiary to allow
an existing violation to remain for a certain period of time that is greater
than ninety (90) days.
Violations (active) may also result from actions on the part of Grantor. Upon
identification of an active violation of the Trust Account Investment
Guidelines, Grantor will notify Beneficiary no later than two (2) Business Days
following identification of the violation. Grantor will correct the violation
within five (5) Business Days of such violation or receive approval from
Beneficiary to allow an existing violation to remain uncured for a certain
period of time that is greater than five (5) Business Days.
- SUBSEQUENT TO A TRIGGERING EVENT OR RESERVE CREDIT EVENT
Upon identification of a violation of the Trust Account Investment Guidelines,
Grantor will notify Beneficiary no later than two (2) Business Days following
identification of the violation. Grantor will correct the violation within five
(5) Business Days of such violation or receive
approval from Beneficiary to allow an existing violation to remain uncured for a
certain period of time that is greater than five (5) Business Days.
REPORTING REQUIREMENTS
On a quarterly basis, Grantor will provide Beneficiary with a summary document
reflecting investments held in the Trust Account relative to the Trust Account
Investment Guidelines. At such time, Grantor will also provide a certification
from an executive officer of Grantor that the management of the Trust Account
during the preceding quarter was in compliance with all of the Trust Account
Investment Guidelines, or, in the alternative, an explanation set forth in
reasonable detail of the nature and extent of any violation of the Trust Account
Investment Guidelines and how such violation was corrected or will be corrected
in accordance with the terms hereof.
Grantor will provide the following Trust Account data for each holding and for
the Trust Account in aggregate to Beneficiary in both PDF and Microsoft Excel
form, which data will be reported on a quarterly basis:
HOLDING LEVEL DETAIL
- Statutory Book Yield
- Market Value
- Statutory Book Value
- Quality
- Duration
AGGREGATE TRUST ACCOUNT LEVEL DETAIL
- Trade Summary
- Sector Summary
- Subsector Summary
- Duration, convexity and key rate durations
- Quality rating summary
- Target Duration
ANNEX A
NON-US DOLLAR DENOMINATED PRIVATE PLACEMENT INVESTMENTS
PRIMARY BUS ID DESCRIPTION INST_CD SUBSECTOR SECTOR CURRENCY
------------------------------------------------------------------------------------------------------------------
G2624@AD5 DAIRY CREST GROUP PLC CORP Industrial IG CORP EUR
N2962#AA1 ENECO HOLDING NV CORP Utilities IG CORP EUR
Q7160#AC3 ORICA FINANCE LTD SENIOR UNSEC CORP Industrial IG CORP AUD
EXHIBIT D
FORM OF CURE NOTICE
From: Massachusetts Mutual Life Insurance Company ("Reinsurer")
To: Hartford Life Insurance Company ("Ceding Company")
cc: Citibank N.A.
Date: [ ]
Re: Cure Notice
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby give you notice pursuant to Section 4.11 of the Reinsurance Agreement
that no Triggering Event or Reserve Credit Event is occurring as of the date
hereof and that the Triggering Event or Reserve Credit Event which was
previously outstanding was cured as follows:
[DESCRIBE APPLICABLE CURE AND INCLUDE REASONABLE SUPPORTING DOCUMENTATION.]
This letter shall constitute a "Cure Notice" for purposes of Section 4.11 of the
Reinsurance Agreement.
Yours faithfully,
[ ]
For and on behalf of Massachusetts Mutual Life Insurance Company
EXHIBIT E
FORM OF CURE ACKNOWLEDGMENT
From: Hartford Life Insurance Company ("Ceding Company")
To: Massachusetts Mutual Life Insurance Company ("Reinsurer")
cc: Citibank N.A.
Date: [ ]
Re: Cure Acknowledgment
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby acknowledge and agree with your certification provided in that certain
Cure Notice dated as of [ ] that no Triggering Event or Reserve Credit Event is
occurring as of the date of such Cure Notice. Pursuant to Section 4.11 of the
Reinsurance Agreement, the delivery of this Cure Acknowledgment shall constitute
a "Cure Event".
This letter shall constitute a "Cure Acknowledgment" for purposes of Section
4.11 of the Reinsurance Agreement.
Yours faithfully,
[ ]
For and on behalf of Hartford Life Insurance Company
APPENDIX 1
RESERVE TRUST ACCOUNT OPENING LETTERS
[SEE ATTACHED]
Appendix 1-1
[LOGO]
MASSMUTUAL
FINANCIAL GROUP(SM)
PDF -- ORIGINALS VIA COURIER WHEN REQUESTED
Fred Esposito
Citibank, NA
388 Greenwich Street, 24th Floor
New York, NY 10013
Dear Fred: December 7, 2012
Please open the domestic custody account listed below under Massachusetts Mutual
Life Insurance Company's TIN # 04-1590850 for the Reserve Trust.
ACCOUNT ID #
DOMESTIC CUSTODY ACCOUNT TITLE (FOR MM ONLY)
----------------------------------------------------------------------------------
240146 Massachusetts Mutual Life Insurance Company 50746
Reserve Trust -- RPG 401K and Tax Exempt
Mass Mutual will provide securities processing, cash management and banking
services instructions under the terms of the Reserve Trust Agreement. This
account will be associated for income transfers only with the new RPG DDA that
we are currently in the process of opening under the name of "Massachusetts
Mutual Life Insurance Company, BA 0034 Master".
Please provide the following services for this custody account:
- Include on all custody reports
- Include on CitiDirect for Securities under user group -- Client ID
MASSMUT
- Include under the CITIBANK SECURITY PROCEDURES FORM -- FACSIMILE
INSTRUCTIONS ON FILE
- Online wire initiation capability through CitiDirect for Securities
- MassMutual will work with Donna Plaska, Project Manager-Specialized
Projects Team, EB Client Services on setting up a new GXS SFTP Pull
for prior day BAI reporting
Please include this custody account on MassMutual's 822 analysis transmission
for Relationship #1637061 under Customer ID#1637061. This account should be
credited with earnings credits calculated at the MassMutual relationship rate on
the average daily cash balance in the account. The account analysis statement
should include all bank charges with AFP service codes at the MassMutual agreed
pricing.
Todd G. Picken, Corporate Vice President and Treasurer and Bruce C. Frisbie,
Assistant Vice President and Associate Treasurer are the authorized signers for
this account. Any instructions to open, change or close this account are valid
if signed by either of the parties. We have enclosed the GENERAL SIGNING
AUTHORITY, BANKING RESOLUTION CERTIFICATE and CERTIFICATE OF INCUMBENCY for your
records.
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
Citibank, NA
December 7, 2012
Page 2 -- RE: RPG 401K and Tax Exempt
Please confirm that this account is operational in all respects by sending an
email to hszydlo@massmutual.com.
Please call Holly Szydlo (860-562-5269) or email to hszydlo@massmutual.com or
Bruce Frisbie (860-562-5250) or email to bfrisbie@massmutual.com if you have any
questions.
Sincerely,
/s/ Bruce C. Frisbie
-------------------------------------
Bruce C. Frisbie, CTP
Assistant Vice President and
Associate Treasurer
/s/ Todd G. Picken
-------------------------------------
Todd G. Picken
Corporate Vice President and
Treasurer
Cc: Dilip Thomas, Citibank
Michael Shek, Citibank
Janelle Tarantino, MassMutual
Mark Remillard, MassMutual
Enclosures:
BANKING RESOLUTION CERTIFICATE
CERTIFICATE OF INCUMBENCY
CLIENT SECURITY PROCEDURES FORM
GENERAL SIGNING AUTHORITY
IRS W-9
RULE 14B
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
[LOGO]
MASSMUTUAL
FINANCIAL GROUP(SM)
PDF -- ORIGINALS VIA COURIER WHEN REQUESTED
Fred Esposito
Citibank, NA
388 Greenwich Street, 24th Floor
New York, NY 10013
Dear Fred: December 7, 2012
Please open the domestic custody account listed below under Massachusetts Mutual
Life Insurance Company's TIN # 04-1590850 for the Reserve Trust.
ACCOUNT ID #
DOMESTIC CUSTODY ACCOUNT TITLE (FOR MM ONLY)
----------------------------------------------------------------------------------
240147 Massachusetts Mutual Life Insurance Company 50749
Reserve Trust -- RPG On Benefit Annuity
Mass Mutual will provide securities processing, cash management and banking
services instructions under the terms of the Reserve Trust Agreement. This
account will be associated with the existing DDA #30510407 for income transfer
only.
Please provide the following services for this custody account:
- Include on all custody reports
- Include on CitiDirect for Securities under user group -- Client ID
MASSMUT
- Include under the CITIBANK SECURITY PROCEDURES FORM -- FACSIMILE
INSTRUCTIONS ON FILE
- Wire initiation capability through CitiDirect for Securities
- MassMutual will work with Donna Plaska, Project Manager- Specialized
Projects Team, EB Client Services on setting up a new GXS SFTP Pull
for prior day BAI reporting
Please include this custody account on MassMutual's 822 analysis transmission
for Relationship #1637061 under Customer ID#1637061. This account should be
credited with earnings credits calculated at the MassMutual relationship rate on
the average daily cash balance in the account. The account analysis statement
should include all bank charges with AFP service codes at the MassMutual agreed
pricing.
Todd G. Picken, Corporate Vice President and Treasurer and Bruce C. Frisbie,
Assistant Vice President and Associate Treasurer are the authorized signers for
this account. Any instructions to open, change or close this account are valid
if signed by either of the parties. We have enclosed the GENERAL SIGNING
AUTHORITY, BANKING RESOLUTION CERTIFICATE and CERTIFICATE OF INCUMBENCY for your
records.
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
Citibank, NA
December 7, 2012
Page 2 -- RE: RPG On Benefit Annuity
Please confirm that this account is operational in all respects by sending an
email to hszydlo@massmutual.com.
Please call Holly Szydlo (860-562-5269) or email to hszydlo@massmutual.com or
Bruce Frisbie (860-562-5250) or email to bfrisbie@massmutual.com if you have any
questions.
Sincerely,
/s/ Bruce C. Frisbie
-------------------------------------
Bruce C. Frisbie, CTP
Assistant Vice President and
Associate Treasurer
/s/ Todd G. Picken
-------------------------------------
Todd G. Picken
Corporate Vice President and
Treasurer
Cc: Dilip Thomas, Citibank
Michael Shek, Citibank
Janelle Tarantino, MassMutual
Mark Remillard, MassMutual
Enclosures:
BANKING RESOLUTION CERTIFICATE
CERTIFICATE OF INCUMBENCY
CLIENT SECURITY PROCEDURES FORM
GENERAL SIGNING AUTHORITY
IRS W-9
RULE 14B
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
[LOGO]
MASSMUTUAL
FINANCIAL GROUP(SM)
PDF -- ORIGINALS VIA COURIER WHEN REQUESTED
Fred Esposito
Citibank, NA
388 Greenwich Street, 24th Floor
New York, NY 10013
Dear Fred: December 7, 2012
Please open the domestic custody account listed below under Massachusetts Mutual
Life Insurance Company's TIN # 04-1590850 for the Reserve Trust.
ACCOUNT ID #
DOMESTIC CUSTODY ACCOUNT TITLE (FOR MM ONLY)
----------------------------------------------------------------------------------
240148 Massachusetts Mutual Life Insurance Company 50748
Reserve Trust -- Ambassador Funds
Mass Mutual will provide securities processing, cash management and banking
services instructions under the terms of the Reserve Trust Agreement. This
account will not be associated with any DDA; principal and interest cash will
remain in this account.
Please provide the following services for this custody account:
- Include on all custody reports
- Include on CitiDirect for Securities under user group -- Client ID
MASSMUT
- Include under the CITIBANK SECURITY PROCEDURES FORM -- FACSIMILE
INSTRUCTIONS ON FILE
- Wire initiation capability through CitiDirect for Securities
- MassMutual will work with Donna Plaska, Project Manager- Specialized
Projects Team, EB Client Services on setting up a new GXS SFTP Pull
for prior day BAI reporting.
Please include this custody account on MassMutual's 822 analysis transmission
for Relationship #1637061 under Customer ID#1637061. This account should be
credited with earnings credits calculated at the MassMutual relationship rate on
the average daily cash balance in the account. The account analysis statement
should include all bank charges with AFP service codes at the MassMutual agreed
pricing.
Todd G. Picken, Corporate Vice President and Treasurer and Bruce C. Frisbie,
Assistant Vice President and Associate Treasurer are the authorized signers for
this account. Any instructions to open, change or close this account are valid
if signed by either of the parties. We have enclosed the GENERAL SIGNING
AUTHORITY, BANKING RESOLUTION CERTIFICATE and CERTIFICATE OF INCUMBENCY for your
records.
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
Citibank, NA
December 7, 2012
Page 2 -- RE: Ambassador Funds
Please confirm that this account is operational in all respects by sending an
email to hszydlo@massmutual.com.
Please call Holly Szydlo (860-562-5269) or email to hszydlo@massmutual.com or
Bruce Frisbie (860-562-5250) or email to bfrisbie@massmutual.com if you have any
questions.
Sincerely,
/s/ Bruce C. Frisbie
-------------------------------------
Bruce C. Frisbie, CTP
Assistant Vice President and
Associate Treasurer
/s/ Todd G. Picken
-------------------------------------
Todd G. Picken
Corporate Vice President and
Treasurer
Cc: Dilip Thomas, Citibank
Michael Shek, Citibank
Janelle Tarantino, MassMutual
Mark Remillard, MassMutual
Enclosures:
BANKING RESOLUTION CERTIFICATE
CERTIFICATE OF INCUMBENCY
CLIENT SECURITY PROCEDURES FORM
GENERAL SIGNING AUTHORITY
IRS W-9
RULE 14B
Massachusetts Mutual Life Insurance Company - Springfield MA 01111-0001
and affiliated companies
APPENDIX 2
ASSET TRANSFER NOTIFICATION
From: Massachusetts Mutual Life Insurance Company (the "Grantor") and Hartford
Life Insurance Company (the "Beneficiary")
To: Citibank N.A. (the "Trustee")
Date: December 31, 2012
Re: Asset Transfer Notification
Dear Sirs:
We are writing in connection with the Trust Agreement dated as of December 31,
2012 among the Grantor, the Beneficiary and the Trustee (as amended, modified or
supplemented from time to time, the "Trust Agreement"). Capitalized terms used
in this letter but not defined herein shall have their respective meanings in
the Trust Agreement.
We hereby give you notice pursuant to 1(a) of the Trust Agreement that all asset
transfers to be effected prior to the Effective Time pursuant to the Agreement
have occurred and the Reserve Trust Account shall automatically and irrevocably
become an account owned by the Grantor effective as of the Effective Time and
shall hereafter be in the name of the Grantor.
Yours faithfully,
[ ]
-----------------------
For and on behalf of Massachusetts Mutual Life Insurance Company
[ ]
-----------------------
For and on behalf of
Hartford Life Insurance Company
Appendix 2-1
EXHIBIT B-1
FORM OF
GENERAL ACCOUNT SETTLEMENT STATEMENT
[SEE ATTACHED]
EXHIBIT B-1
GENERAL ACCOUNT SETTLEMENT STATEMENT
REFLECTS ALL ACTIVITY FOR ACCOUNTING PERIOD [ ]:
PAID OR RECEIVED
BY REINSURER AS
DESCRIBED IN
SECTION 3.4(B) OF
TOTAL THE AGREEMENT NET
-----------------------------------------------------------------------------------------------------------------------------------
1. RECOVERABLES -- SECTION 3.1(B)
(i) Premiums (premiums, considerations, deposits, loan repayments and other
receipts received in respect of the Covered Insurance Policies, including
any amounts received under any Plan ASA) $ $ $
(ii) Litigation recoveries to the extent such recoveries relate to Reinsured
Liabilities $ $ $
(iii) Charges, fees and other payments described in Section 3.1(b) (iii) of the
Agreement to the extent related to the Covered Insurance Policies $ $ $
(iv) All other payments, collections, fees, credits, releases of funds to the
Ceding Company from any Separate Accounts established by the Ceding Company
and any and all recoveries relating to the Reinsured Liabilities or the
Covered Insurance Policies $ $ $
(v) Investment income actually received relating to items (i) through (iv) above $ $ $
TOTAL RECOVERABLES = (i) + (ii) + (iii) + (iv) + (v) $ $ $
2. GENERAL ACCOUNT LIABILITIES
(i) All gross Liabilities, obligations and expenses arising under the Covered
Insurance Policies (excluding Separate Account Liabilities)
(a) Liabilities resulting under the terms and conditions of the Covered $ $ $
Insurance Policies as described in subpart (i)(a) of the definition of
"General Account Liabilities" set forth in Article I of the Agreement
(b) Liabilities arising under changes to the terms and conditions of the Covered $ $ $
Insurance Policies as described in subpart (i)(b) of the definition of
"General Account Liabilities" set forth in Article I of the Agreement
(c) Liabilities that relate to any amounts held in the general account of the $ $ $
Ceding Company pending transfer to the Separate Accounts
TOTAL (i) = (a) + (b) + (c) $ $ $
(ii) The following Liabilities, obligations, expenses and Premium taxes
(a) Premium taxes as described in subpart (ii)(a) of the definition of "General $ $ $
Account Liabilities" set forth in Article I of the Agreement
(b) Fees and other amounts payable in respect of the Covered Insurance Policies $ $ $
and Plan ASAs
(c) Compensation and other servicing and administration fees payable with $ $ $
respect to the Covered Insurance Policies payable by the Ceding Company or
HSD to or for the benefit of the Distributors
(d) Reinsurer Extra Contractual Obligations $ $ $
TOTAL (ii) = (a) + (b) + (c) + (d) $ $ $
(iii) The following Liabilities, obligations, excise taxes and expenses
(a) Guaranty association assessments and similar charges to the extent related $ $ $
to Premiums earned on or after the Effective Time as described in subpart
(iii)(a) of the definition of "General Account Liabilities" set forth in
Article I of the Agreement
(b) Liabilities to the extent relating to periods on or after the Effective Time $ $ $
that relate to the Separate Accounts that are not payable out of the assets
of Separate Accounts as described in subpart (iii)(b) of the definition of
"General Account Liabilities" set forth in Article I of the Agreement
(c) excise taxes imposed with respect to the administration of the Covered $ $ $
Insurance Policies on or after the Effective Time
TOTAL (iii) = (a) + (b) + (c) $ $ $
TOTAL GENERAL ACCOUNT LIABILITIES = (i) + (ii) + (iii) $ $ $
3. NET SETTLEMENT = (1) - (2) $
EXHIBIT B-2
FORM OF SEPARATE ACCOUNT SETTLEMENT STATEMENT
[SEE ATTACHED]
EXHIBIT B-2
SEPARATE ACCOUNT SETTLEMENT STATEMENT
REFLECTS ALL ACTIVITY FOR ACCOUNTING PERIOD [ ]:
TOTAL
--------------------------------------------------------------------------
1 SEPARATE ACCOUNT LIABILITIES
All Liabilities, obligations, expenses and Premium and
excise taxes arising under the Covered Insurance Policies to
the extent payable out of the Separate Accounts $
EXHIBIT C
TRUST ACCOUNT INVESTMENT GUIDELINES
The following Trust Account Investment Guidelines are effective at all times and
will be monitored monthly. Any changes to the Trust Account Investment
Guidelines must be agreed upon in writing by Beneficiary (as defined below) and
Grantor (as defined below). Reference is made to that certain Reserve Trust
Agreement, dated as of December 31, 2012 (the "Reserve Trust Agreement"), by and
among Massachusetts Mutual Life Insurance Company ("Grantor"), Hartford Life
Insurance Company ("Beneficiary") and Citibank N.A. ("Trustee"). Capitalized
terms used herein shall have the meaning set forth in the Reserve Trust
Agreement.
TRUST ACCOUNT GUIDELINES
- DURATION
The effective duration will be managed to be within a duration of +/- 1.0 years
of a fixed duration target to be provided by Grantor. Grantor shall provide to
the Beneficiary, annually, a report regarding its fixed duration target as well
as an analysis as to the most efficient duration to manage the Trust Account.
Such fixed duration target is subject to Beneficiary's approval (such approval
not to be unreasonably withheld).
While within this permissible duration range, asset duration does not
necessarily need to be actively rebalanced towards the specified duration
target.
- KEY RATE DURATION
A significant portion of the Trust Account will seek to ladder its maturities so
that the assets are managed consistent with liability key rates or specific key
rate duration targets. The key rate duration gaps will remain within 1.0 years
of their targets.
- CONVEXITY
Convexity will be positive.
- ACCOUNT VALUE
Account Value shall mean, prior to a Triggering Event or Reserve Credit Event,
Statutory Book Value, and from and after a Triggering Event or Reserve Credit
Event, Fair Market Value, in each case, as defined in the Reserve Trust
Agreement.
- CREDIT QUALITY
Restrictions on aggregate Account Value exposure by quality are as follows:
EXPOSURE: MAXIMUM:
------------------------------------------------------------------------------
"A-" and Above ("NAIC 1") 100% of Exposure
"BBB+", "BBB", "BBB-" ("NAIC 2") 35% of Exposure
Below "BBB-" (BIG) ("NAIC 3" or below) 10% of Exposure, to be reduced by 1%
annually beginning as of January 1,
2013 to 5% of Exposure not later than
January 1, 2017
5% of Exposure after January 1, 2017
Non-Rated (exclusive of Alternative 5% of Exposure
Assets, Common Equity, Real Estate
Debt, Cash and Cash Equivalents)
Alternative Assets (inclusive of 5% of Exposure
Common Equity)
Non-Rated Real Estate Debt 20% of Exposure
Maximum exposures by credit quality will be based on NAIC rating or, if
unavailable, an equivalent rating based on Grantor's internal rating system.
If NAIC rating is not available, maximum exposure will be measured by Grantor
based on effective rating as calculated by Grantor's analytical system. At the
time of writing of this document, a security's effective rating is determined as
follows:
- If rated by all of Moody's, S&P, and Fitch, the median rating will prevail.
- If rated by only two rating agencies, the lower rating will prevail.
- If rated by only one rating agency, that agency's rating will be used.
- If not rated by any agency, Grantor's internal rating will be used.
- SECTOR ALLOCATION GUIDELINES
The table below outlines the permissible sector maximums for the Trust Account
based on percentage of exposure on Account Value basis. Investments in any
assets not included in the Sector Allocation table below are prohibited. All
holdings are to be US Dollar denominated, except for the non-US Dollar
denominated private placement investments set forth in Annex A hereto. Use of
leverage is prohibited.
SECTOR: PERMISSIBLE MAXIMUM:
-----------------------------------------------------------------------------------------
Alternative Assets (Hedge Funds, Private Equity Funds, and common
equity) 5%
Asset Backed Securities, Collateralized Loan Obligations and
Collateralized Debt Obligations 15%
Bank Loans 5%
Cash and Cash Equivalents 100%
Commercial Mortgage Backed Securities 15%
Commercial Mortgages (excluding B-Notes and Mezzanine Debt
Financing, other than holdings transferred at Closing) 20%
Emerging Markets Debt 5%
High Yield Corporate Debt 5%
Investment Grade Corporate Debt 80%
Municipal Bonds (Tax Exempt) & Sovereign Bonds 10%
Residential Mortgage Backed Securities 20%
US Agency Securities 100%
US Treasury Securities (including STRIPS/TIPS) 100%
There may also be times when allowable asset classes may be held in LLC, LP or
other legal forms. In such cases, if the economics of the asset class are
equivalent to the economics of direct ownership, the alternative ownership form
will be permitted and will be aggregated against the limit for the underlying
assets, provided, however, that the asset owned by the Trust is designated "NAIC
1" or "NAIC 2".
- ISSUER LIMITS
Investments in the obligations of any single issuer, other than Governments or
Government Agencies (which, for the purposes of the Trust Account Investment
Guidelines, shall only include U.S. Treasuries, Resolution Trust Corporation
(Refcorp) bonds and obligations issued by GNMA, FNMA, FHLMC and FHA), shall not
exceed an Account Value equal to the greater of 2% of the aggregate Account
Value of the Trust Account and $15 million.
- ILLIQUID ASSETS
Total exposure to the following sectors will be no greater than 50% of the
exposure on an Account Value basis of the Trust Account:
- Non-AAA or Non-Senior Asset Backed Securities
- Non-AAA or Non-Senior Commercial Mortgage Backed Securities
- Collateralized Debt Obligations
- Collateralized Loan Obligations
- Private Emerging Markets (excluding 144a and Reg S securities)
- Private High Yield Corporates (excluding 144a and Reg S securities)
- Private Investment Grade Corporates (excluding 144a and Reg S securities)
- Alternative Assets
- Bank Loans
- Commercial Mortgages
In any event, no more than 40% of the Account Value of the Trust Account will be
classified Level 3 Fair Value as defined by FASB Accounting Standards
Codification 820, FAIR VALUE MEASUREMENT.
VIOLATION RESOLUTION PROCESS
- PRIOR TO A TRIGGERING EVENT OR RESERVE CREDIT EVENT
Upon identification of a violation of the Trust Account Investment Guidelines,
Grantor will determine if the violation is passive or active. A passive
violation may result from changes in the Account Value of the account, a
downgrade of a security or the restructuring of an asset by a person other than
Grantor or its Affiliates. If the Trust Account Investment Guidelines are
passively violated, sales will not be required to bring the Trust Account back
into compliance. Purchases, however, cannot be made that cause the Trust Account
to further violate the Trust Account Investment Guidelines. Grantor will report
the passive violation to Beneficiary no later than five (5) business days after
identification of the violation. Grantor will correct the violation within
ninety (90) days of such violation or receive approval from Beneficiary to allow
an existing violation to remain for a certain period of time that is greater
than ninety (90) days.
Violations (active) may also result from actions on the part of Grantor. Upon
identification of an active violation of the Trust Account Investment
Guidelines, Grantor will notify Beneficiary no later than two (2) Business Days
following identification of the violation. Grantor will correct the violation
within five (5) Business Days of such violation or receive approval from
Beneficiary to allow an existing violation to remain uncured for a certain
period of time that is greater than five (5) Business Days.
- SUBSEQUENT TO A TRIGGERING EVENT OR RESERVE CREDIT EVENT
Upon identification of a violation of the Trust Account Investment Guidelines,
Grantor will notify Beneficiary no later than two (2) Business Days following
identification of the violation. Grantor will correct the violation within five
(5) Business Days of such violation or receive approval from Beneficiary to
allow an existing violation to remain uncured for a certain period of time that
is greater than five (5) Business Days.
REPORTING REQUIREMENTS
On a quarterly basis, Grantor will provide Beneficiary with a summary document
reflecting investments held in the Trust Account relative to the Trust Account
Investment Guidelines. At such time, Grantor will also provide a certification
from an executive officer of Grantor that the management of the Trust Account
during the preceding quarter was in compliance with all of the Trust Account
Investment Guidelines, or, in the alternative, an explanation set forth in
reasonable detail of the nature and extent of any violation of the Trust Account
Investment Guidelines and how such violation was corrected or will be corrected
in accordance with the terms hereof.
Grantor will provide the following Trust Account data for each holding and for
the Trust Account in aggregate to Beneficiary in both PDF and Microsoft Excel
form, which data will be reported on a quarterly basis:
HOLDING LEVEL DETAIL
- Statutory Book Yield
- Market Value
- Statutory Book Value
- Quality
- Duration
AGGREGATE TRUST ACCOUNT LEVEL DETAIL
- Trade Summary
- Sector Summary
- Subsector Summary
- Duration, convexity and key rate durations
- Quality rating summary
- Target Duration
ANNEX A
NON-US DOLLAR DENOMINATED PRIVATE PLACEMENT INVESTMENTS
PRIMARY BUS ID DESCRIPTION INST_CD SUBSECTOR SECTOR CURRENCY
-----------------------------------------------------------------------------------------------------
G2624@AD5 DAIRY CREST GROUP PLC CORP Industrial IG CORP EUR
N2962#AA1 ENECO HOLDING NV CORP Utilities IG CORP EUR
Q7160#AC3 ORICA FINANCE LTD SENIOR UNSEC CORP Industrial IG CORP AUD
EXHIBIT D
TERMINAL SETTLEMENT UNDER SECTION 7.4
1. Amounts payable by the Ceding Company to the Reinsurer pursuant to Section
3.1(b) as of the Recapture Date, LESS
2. Amounts payable by the Reinsurer to the Ceding Company for the Reinsured
Liabilities pursuant to Section 3.3 as of the Recapture Date, LESS
3. General Account Reserves as of the Recapture Date, PLUS
4. Any amounts withheld by the Ceding Company in accordance with Section 4.8
as of the Recapture Date and any assets of the Trust Account that are
released to the Ceding Company upon the direction of the Reinsurer on the
Recapture Date, PLUS
5. (A) If the Recapture Date occurs prior to the date that is ten (10) years
following the Closing Date, an amount equal to A MINUS B, where "A" is
equal to the Ceding Commission reduced on a straight line basis over ten
(10) years and "B" is equal to any costs and expenses related to the
transition of the servicing of the Covered Insurance Policies (but not the
actual costs and expenses of such servicing) from the Ceding Company to the
Reinsurer or (B) if the Recapture Date occurs on or after the date that is
ten (10) years following the Closing Date, an amount equal to zero. For the
avoidance of doubt, the amount calculated pursuant to (A) above shall not
be negative.
EXHIBIT E
FORM OF TRUST WITHDRAWAL EVENT NOTICE
From: Massachusetts Mutual Life Insurance Company ("Reinsurer")
To: Hartford Life Insurance Company ("Ceding Company")
cc: Citibank N.A.
Date: [ ]
Re: Trust Withdrawal Event Notice
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
The Reinsurer hereby certifies to the Ceding Company that as of the date hereof
the Trust Withdrawal Event Conditions are satisfied as follows:
(i) the financial strength of the Reinsurer is [ ] as rated by S&P and [ ] as
rated by Moody's;
(ii) the Reinsurer's RBC Ratio as of the quarter end immediately preceding the
date of this letter was [ ]%;
(iii) the numerical value of the Required Balance is [ ]; and
(iv) no Reserve Credit Event has occurred and is continuing.
[Trust Withdrawal Event Notice to include reasonable supporting documentation.]
This letter shall constitute a "Trust Withdrawal Event Notice" for purposes of
Section 4.10 of the Reinsurance Agreement.
Yours faithfully,
[ ]
For and on behalf of
Massachusetts Mutual Life Insurance Company
EXHIBIT F
FORM OF TRUST WITHDRAWAL EVENT ACKNOWLEDGMENT
From: Hartford Life Insurance Company ("Ceding Company")
To: Massachusetts Mutual Life Insurance Company ("Reinsurer")
cc: Citibank N.A.
Date: [ ]
Re: Trust Withdrawal Event Acknowledgment
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby acknowledge and agree with your certification provided in that certain
Trust Withdrawal Event Notice dated as of [ ] that the Trust Withdrawal Event
Conditions are satisfied as of the date of such Trust Withdrawal Event Notice.
Pursuant to Section 4.10 of the Reinsurance Agreement, the Reinsurer is entitled
to withdraw all or any portion of the assets in that certain reserve trust
account established by the Reinsurer for the benefit of the Ceding Company under
the Trust Agreement dated as of December 31, 2012, by and among Citibank N.A.,
the Reinsurer and the Ceding Company.
Yours faithfully,
[ ]
For and on behalf of Hartford Life Insurance Company
EXHIBIT G
FORM OF CURE NOTICE
From: Massachusetts Mutual Life Insurance Company ("Reinsurer")
To: Hartford Life Insurance Company ("Ceding Company")
cc: Citibank N.A.
Date: [ ]
Re: Cure Notice
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby give you notice pursuant to Section 4.11 of the Reinsurance Agreement
that no Triggering Event or Reserve Credit Event is occurring as of the date
hereof and that the Triggering Event or Reserve Credit Event which was
previously outstanding was cured as follows:
[DESCRIBE APPLICABLE CURE AND INCLUDE REASONABLE SUPPORTING DOCUMENTATION.]
This letter shall constitute a "Cure Notice" for purposes of Section 4.11 of the
Reinsurance Agreement.
Yours faithfully,
[ ]
For and on behalf of Massachusetts Mutual Life Insurance Company
EXHIBIT H
FORM OF CURE ACKNOWLEDGMENT
From: Hartford Life Insurance Company ("Ceding Company")
To: Massachusetts Mutual Life Insurance Company ("Reinsurer")
cc: Citibank N.A.
Date: [ ]
Re: Cure Acknowledgment
Dear Sirs:
We are writing in connection with the Reinsurance Agreement dated as of January
1, 2013 between the Reinsurer and the Ceding Company (as amended, modified or
supplemented from time to time, the "Reinsurance Agreement"). Capitalized terms
used in this letter but not defined herein shall have their respective meanings
in the Reinsurance Agreement.
We hereby acknowledge and agree with your certification provided in that certain
Cure Notice dated as of [ ] that no Triggering Event or Reserve Credit Event is
occurring as of the date of such Cure Notice. Pursuant to Section 4.11 of the
Reinsurance Agreement, the delivery of this Cure Acknowledgment shall constitute
a "Cure Event".
This letter shall constitute a "Cure Acknowledgment" for purposes of Section
4.11 of the Reinsurance Agreement.
Yours faithfully,
[ ]
For and on behalf of Hartford Life Insurance Company
EXHIBIT I
SCHEDULE OF PLAN ADMINISTRATIVE SERVICE AGREEMENTS
[SEE ATTACHED]
EX-99.5
6
a13-1951_1ex99d5.txt
EX-99.5
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
------------
Mark J. Niland
does hereby authorize Christopher M. Grinnell and/or Sadie R. Gordon,
individually, to sign as his agent any and all pre-effective amendments and
post-effective amendments filed on Form S-6 for the File Numbers listed on
Appendix A attached hereto, with respect to Hartford Life Insurance Company and
does hereby ratify such signature heretofore made by such person.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney for the
purpose herein set forth.
By: /s/ Mark J. Niland Dated as of February 4, 2013
----------------------------------------------------
Mark J. Niland
APPENDIX A
Hartford Life Insurance Company Power of Attorney
Dated as of February 4, 2013
Filed on Form S-6
File Numbers:
333-114401
333-114404
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
------------
Peter F. Sannizarro
does hereby authorize Christopher M. Grinnell and/or Sadie R. Gordon,
individually, to sign as his agent any and all pre-effective amendments and
post-effective amendments filed on Form S-6 for the File Numbers listed on
Appendix A attached hereto, with respect to Hartford Life Insurance Company and
does hereby ratify such signature heretofore made by such person.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney for the
purpose herein set forth.
By: /s/ Peter F. Sannizarro Dated as of February 4, 2013
----------------------------------------------------
Peter F. Sannizarro
APPENDIX A
Hartford Life Insurance Company Power of Attorney
Dated as of February 4, 2013
Filed on Form S-6
File Numbers:
333-114401
333-114404
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
------------
Robert W. Paiano
does hereby authorize Christopher M. Grinnell and/or Sadie R. Gordon,
individually, to sign as his agent any and all pre-effective amendments and
post-effective amendments filed on Form S-6 for the File Numbers listed on
Appendix A attached hereto, with respect to Hartford Life Insurance Company and
does hereby ratify such signature heretofore made by such person.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney for the
purpose herein set forth.
By: /s/ Robert W. Paiano Dated as of February 4, 2013
----------------------------------------------------
Robert W. Paiano
APPENDIX A
Hartford Life Insurance Company Power of Attorney
Dated as of February 4, 2013
Filed on Form S-6
File Numbers:
333-114401
333-114404
HARTFORD LIFE INSURANCE COMPANY
POWER OF ATTORNEY
------------
Beth A. Bombara
does hereby authorize Christopher M. Grinnell and/or Sadie R. Gordon,
individually, to sign as her agent any and all pre-effective amendments and
post-effective amendments filed on Form S-6 for the File Numbers listed on
Appendix A attached hereto, with respect to Hartford Life Insurance Company and
does hereby ratify such signature heretofore made by such person.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney for the
purpose herein set forth.
By: /s/ Beth A. Bombara Dated as of February 4, 2013
----------------------------------------------------
Beth A. Bombara
APPENDIX A
Hartford Life Insurance Company Power of Attorney
Dated as of February 4, 2013
Filed on Form S-6
File Numbers:
333-114401
333-114404