Amendment No. 2 to Form 10

As filed with the Securities and Exchange Commission on April 17, 2017

File No. 001-37905

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM 10

 

 

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

BRIGHTHOUSE FINANCIAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   81-3846992

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

Gragg Building, 11225 North Community House Road

Charlotte, North Carolina

  28277
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code:

(212) 578-9500

 

 

Securities to be registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

to be so Registered

 

Name of Each Exchange on

Which Each Class is to be Registered

Common stock, par value $0.01 per share   NASDAQ Global Select Market

Securities to be registered pursuant to Section 12(g) of the Act:

None

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒  (Do not check if a smaller reporting company)    Smaller reporting company  
Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

 

 

 


Brighthouse Financial, Inc.

Information Required in Registration Statement

Cross-Reference Sheet Between the Information Statement and Items of Form 10

This Registration Statement on Form 10 incorporates by reference information contained in our Information Statement filed as Exhibit 99.1 to this Form 10. For your convenience, we have provided below a cross-reference sheet identifying where the items required by Form 10 can be found in the Information Statement.

 

Item No.

  

Item Caption

  

Location in Information Statement

1.    Business    See “Summary,” “Risk Factors,” “Note Regarding Forward-Looking Statements,” “The Separation and Distribution,” “Formation of Brighthouse and the Restructuring,” “Recapitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Regulation” and “Where You Can Find More Information.”
1A.    Risk Factors    See “Summary,” “Risk Factors” and “Note Regarding Forward-Looking Statements.”
2.    Financial Information    See “Summary,” “Risk Factors,” “Recapitalization,” “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk.”
3.    Properties    See “Business — Properties.”
4.    Security Ownership of Certain Beneficial Owners and Management    See “Beneficial Ownership of Common Stock.”
5.    Directors and Executive Officers    See “Management.”
6.    Executive Compensation    See “Management” and “Compensation of Executive Officers and Directors.”
7.    Certain Relationships and Related Transactions and Director Independence    See “Risk Factors,” “Certain Relationships and Related Person Transactions” and “Management.”
8.    Legal Proceedings    See “Business — Litigation and Regulatory Matters.”
9.    Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters    See “The Separation and Distribution,” “Dividend Policy,” “Beneficial Ownership of Common Stock,” “Description of Capital Stock” and “Shares Eligible for Future Sale.”
10.    Recent Sales of Unregistered Securities    In the three years preceding the filing of this registration statement, the registrant has not issued any securities that were not registered under the Securities Act, except for the issuance of 100,000 shares of common stock of the registrant to MetLife, Inc. for aggregate consideration of $1,000 on September 28, 2016 in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
11.    Description of Registrant’s Securities to be Registered    See “Description of Capital Stock.”

 

2


Item No.

  

Item Caption

  

Location in Information Statement

12.    Indemnification of Directors and Officers    See “Risk Factors,” “Certain Relationships and Related Person Transactions” and “Description of Capital Stock — Limitation of Liability and Indemnification of Directors and Officers.”
13.    Financial Statements and Supplementary Data    See “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Index to Combined Financial Statements, Notes and Schedules” and the financial statements referenced therein.
14.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    None.
15.    Financial Statements and Exhibits   

(a)    Financial Statements

 

See “Index to Combined Financial Statements, Notes and Schedules” and the financial statements referenced therein.

 

(b)    Exhibits

 

See below.

The following documents are filed as exhibits hereto:

 

Exhibit
No.

  

Exhibit Descriptions

  2.1    Form of Master Separation Agreement between MetLife, Inc. and Brighthouse Financial, Inc.*
  3.1    Form of Amended and Restated Certificate of Incorporation of Brighthouse Financial, Inc.*
  3.2    Form of Amended and Restated By-laws of Brighthouse Financial, Inc.*
  4.1    Form of Certificate for Common Stock, par value $0.01 per share*
10.1    Form of Transition Services Agreement among MetLife Services and Solutions, LLC, Brighthouse Services, LLC, MetLife, Inc. (but only with respect to certain provisions) and Brighthouse Financial, Inc. (but only with respect to certain provisions)*
10.2    Form of Registration Rights Agreement between MetLife, Inc. and Brighthouse Financial, Inc.
10.3    Form of Investment Management Agreement
10.4    Form of Intellectual Property License Agreement
10.5    Form of Tax Receivables Agreement
10.6    Form of Tax Separation Agreement
10.8    Revolving Credit Agreement, dated as of December 2, 2016, among Brighthouse Financial, Inc., JP Morgan Chase Bank, N.A., as administrative agent, and the other lenders named therein**
10.9    Term Loan Agreement, dated as of December 2, 2016, among Brighthouse Financial, Inc., JP Morgan Chase Bank, N.A., as administrative agent, and the other lenders named therein**
21.1    List of subsidiaries of Brighthouse Financial, Inc.*
99.1    Preliminary Information Statement of Brighthouse Financial, Inc., subject to completion, dated April 17, 2017
99.2    Form of Notice of Internet Availability of Information Statement Materials

 

* To be filed by amendment.
** Previously filed on December 6, 2016.

 

3


SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement on Form 10 to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BRIGHTHOUSE FINANCIAL, INC.
By:  

/s/ Anant Bhalla

  Name: Anant Bhalla
  Title: Chief Financial Officer

Dated: April 17, 2017

 

4

EX-10.2

Exhibit 10.2

FORM OF REGISTRATION RIGHTS AGREEMENT

dated as of

[●], 2017

between

MetLife, Inc.

and

Brighthouse Financial, Inc.


TABLE OF CONTENTS

 

ARTICLE 1

 

DEFINITIONS

     1   

1.1.

 

Definitions

     1   

1.2.

 

Other Terms

     3   

1.3.

 

Rules of Construction

     3   

ARTICLE 2

 

REGISTRATION RIGHTS

     4   

2.1.

 

Demand Registration

     4   
 

2.1.1

 

Request for Registration

     4   
 

2.1.2

 

Shelf Registration

     5   
 

2.1.3

 

Selection of Underwriters

     5   
 

2.1.4

 

Priority on Demand Registrations

     6   
 

2.1.5

 

Deferral or Suspension of Filing

     6   

2.2.

 

Piggyback Registrations

     7   
 

2.2.1

 

Right to Piggyback

     7   
 

2.2.2

 

Priority on Piggyback Registrations

     8   

2.3.

 

Shelf Registration Statement

     9   
 

2.3.1

 

Filing

     9   
 

2.3.2

 

Block Trade

     10   

2.4.

 

Holdback Agreements

     11   

2.5.

 

Registration Procedures

     12   

2.6.

 

Suspension of Dispositions

     16   

2.7.

 

Registration Expenses

     16   
 

2.7.1

 

Demand Registrations

     16   
 

2.7.2

 

Piggyback Registrations

     17   
 

2.7.3

 

Block Trades

     17   

2.8.

 

Indemnification

     18   
 

2.8.1

 

Indemnification by SpinCo

     18   
 

2.8.2

 

Indemnification by Holders

     18   
 

2.8.3

 

Indemnification Procedures

     19   
 

2.8.4

 

Contribution

     20   
 

2.8.5

 

Survival of Indemnification

     21   

2.9.

 

Transfer of Registration Rights

     21   

2.10.

 

Rule 144

     21   

 

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2.11.

 

Preservation of Rights

     21   

ARTICLE 3

 

TERMINATION

     22   

3.1.

 

Termination

     22   

ARTICLE 4

 

MISCELLANEOUS

     22   

4.1.

 

Notices

     22   

4.2.

 

Authority

     23   

4.3.

 

Governing Law

     23   

4.4.

 

Waiver of Jury Trial

     24   

4.5.

 

Successors and Assigns

     24   

4.6.

 

Severability

     24   

4.7.

 

Remedies

     24   

4.8.

 

Waivers

     25   

4.9.

 

Amendment

     25   

4.10.

 

Counterparts

     25   

 

ii


REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of [●], 2017, is between MetLife, Inc., a Delaware corporation (“RemainCo”), and Brighthouse Financial, Inc., a Delaware corporation (“SpinCo”).

R E C I T A L S

WHEREAS, RemainCo and SpinCo are party to that certain Master Separation Agreement, dated as of [●], 2017 (the “Master Agreement”), pursuant to which, among other things, RemainCo intends to transfer shares of SpinCo’s common stock, par value $0.001 (the “Common Stock”), to holders of shares of RemainCo’s common stock (the “Distribution”);

WHEREAS, following the Distribution, RemainCo will continue to own shares of Common Stock; and

WHEREAS, in connection with the Distribution, SpinCo has agreed to provide RemainCo certain registration rights as set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE 1

DEFINITIONS

1.1. Definitions. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to such terms in the Master Agreement. The following terms shall have the meanings set forth in this Section 1.1:

Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any Person, means the possession, directly or indirectly, of the power to cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

Approved Block Trade” means a block sale or non-marketed underwritten offering of Registrable Securities for a number of Registerable Securities with a market value, as of the closing price of the day immediately prior to such sale or offering, that is equal to at least $15,000,000, in a bid process effected through an underwriter.

Board of Directors” means the Board of Directors of SpinCo.

Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York City.

 

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Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder.

Excluded Registration” means a registration under the Securities Act of (i) Registrable Securities pursuant to one or more Demand Registrations pursuant to Section 2.1 hereof, (ii) securities registered on Form S-8 or any similar or successor form, and (iii) securities registered to effect the acquisition of, or combination with, another Person.

Holder” means (i) RemainCo and (ii) from and after the date hereof, any Permitted Transferee or any direct transferee of RemainCo or a Permitted Transferee who shall become a party to this Agreement in accordance with Section 2.9 and has agreed in writing to be bound by the terms of this Agreement.

Permitted Transferee” means any Subsidiary of RemainCo.

Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof.

register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

Registrable Securities” means SpinCo’s Common Stock and any securities issued or issuable directly or indirectly with respect to, in exchange for, upon the conversion of or in replacement of SpinCo’s Common Stock, whether by way of a dividend or distribution or stock split or in connection with a combination of shares, recapitalization, merger, consolidation, exchange or other reorganization, owned by the Holders, whether owned on the date hereof or acquired hereafter; provided, however, that shares of SpinCo’s Common Stock that, pursuant to Section 3.1, no longer have registration rights hereunder shall not be considered Registrable Securities.

Registration Statement” means any registration statement of SpinCo under the Securities Act that permits the public offering of any of the Registrable Securities pursuant to the provisions of this Agreement, including the prospectus, amendments and supplements to such registration statement, all exhibits, all material incorporated by reference or deemed to be incorporated by reference in such registration statement and all other documents filed with the SEC to effect a registration under the Securities Act.

Requesting Holders” shall mean any Holder or Holders requesting to have their Registrable Securities included in any Demand Registration or Shelf Registration.

SEC” means the Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.

Shelf Registration Statement” means a Registration Statement that contemplates offers and sales of securities pursuant to Rule 415 promulgated under the Securities Act.

 

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Subsidiary” means (i) any corporation of which a majority of the securities entitled to vote generally in the election of directors thereof, at the time as of which any determination is being made, are owned by RemainCo, either directly or indirectly and (ii) any joint venture, general or limited partnership, limited liability company or other legal entity in which RemainCo is the record or beneficial owner, directly or indirectly, of a majority of the voting interests or the general partner (or a majority of the voting interests of the general partner).

Underwritten Offering” means a discrete registered offering of securities conducted by one or more underwriters pursuant to the terms of an underwriting agreement.

1.2. Other Terms. For purposes of this Agreement, the following terms have the meanings set forth in the section or agreement indicated.

 

Term    Section
Advice    Section 2.6
Agreement    Introductory Paragraph
Common Stock    Recitals
Convertible or Exchange Registration    Section 2.7
Demand Registration    Section 2.1.1(a)
Demand Request    Section 2.1.1(a)
Demanding Shareholders    Section 2.1.1(a)
Distribution    Recitals
FINRA    Section 2.5(xvii)
Inspectors    Section 2.5(xiii)
Master Agreement    Recitals
Piggyback Registration    Section 2.2.1
Records    Section 2.5(xiii)
Required Filing Date    Section 2.1.1(b)
Seller Affiliates    Section 2.8.1
Shelf Registration    Section 2.1.2
Suspension Notice    Section 2.6

1.3. Rules of Construction. Unless the context otherwise requires:

 

  (1) a term has the meaning assigned to it;

 

  (2) or” is not exclusive;

 

  (3) words in the singular include the plural, and words in the plural include the singular;

 

  (4) provisions apply to successive events and transactions; and

 

  (5) herein,” “hereof” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

 

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ARTICLE 2

REGISTRATION RIGHTS

2.1. Demand Registration.

2.1.1 Request for Registration.

(a) Commencing on the date hereof, any Holder or Holders of Registrable Securities shall have the right to require SpinCo to file a registration statement on Form S-1 or S-3 or any similar or successor to such forms under the Securities Act for a public offering of all or part of its or their Registrable Securities (a “Demand Registration”), by delivering to SpinCo written notice stating that such right is being exercised, naming, if applicable, the Holders whose Registrable Securities are to be included in such registration (collectively, the “Demanding Shareholders”), specifying the number of each such Demanding Shareholder’s Registrable Securities to be included in such registration and, subject to Section 2.1.3 hereof, describing the intended method of distribution thereof (a “Demand Request”). SpinCo shall use its reasonable best efforts to cause Demand Registrations to be registered on Form S-3 (or any similar or successor form) once SpinCo becomes eligible to use Form S-3 (or any similar or successor form).

(b) Subject to Section 2.1.5, SpinCo shall file the registration statement in respect of a Demand Registration as soon as practicable and, in any event, within forty-five (45) days after receiving a Demand Request (the “Required Filing Date”) and shall use reasonable best efforts to cause the same to be declared effective by the SEC as promptly as practicable after such filing; provided, however, that:

(i) SpinCo shall not be obligated to effect a Demand Registration pursuant to Section 2.1.1(a) unless the Demand Request is for a number of Registrable Securities with a market value, as of the closing price of the day such Demand Registration is submitted, that is equal to at least $100,000,000; and

(ii) Subject to Section 2.1.1(a), (x) RemainCo and its Permitted Transferees will be entitled to request, collectively, up to eight (8) Demand Registrations (including Shelf Registrations) and (y) any Holder that is not RemainCo or its Permitted Transferee will be entitled to request up to (A) if such Holder holds, at the time such Holder becomes party to this Agreement pursuant to Section 2.9, Registrable Securities representing at least fifteen percent (15%) of the then issued and outstanding shares of Common Stock, four (4) Demand Registrations (including Shelf Registrations) or (B) in all other instances, two (2) Demand Registrations (including Shelf Registrations), in each case without a Demand Registration requested pursuant to clause (x) or (y) counting against the total number of demands granted under the other clause. SpinCo and any Holder shall be entitled to participate in a Demand Registration initiated by any other Holder, and SpinCo shall give prompt written notice to each Holder of Registrable Securities other than the Demanding Shareholders (which notice shall be given not less than seven (7) Business Days prior to the anticipated filing date of the registration statement or, in the case of a Shelf Registration Statement, preliminary prospectus supplement in respect of such Demand Registration), which notice shall offer each such Holder the opportunity to include any or all of its Registrable Securities in such registration statement, subject to the limitations contained in Section 2.1.4 hereof. Each such Holder who desires to have its Registrable Securities included in such registration statement shall so advise SpinCo in writing (stating the number of shares desired to be registered) within three (3) Business Days after the date of such notice from SpinCo. Any Holder shall have the right to withdraw such Holder’s request for inclusion of such Holder’s Registrable Securities in any registration statement pursuant to this Section 2.1.1 by giving written notice to SpinCo of such withdrawal. Subject to Section 2.1.4 below, SpinCo shall include in such registration statement all such Registrable Securities so requested to be included therein.

 

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(iii) Until the date on which SpinCo first becomes eligible to use a Form S-3 (or any similar or successor form) as a Shelf Registration Statement, SpinCo will not be obligated to effect more than one Demand Registration which, for the avoidance of doubt, shall be in addition to any registration on a Shelf Registration Statement, in any four (4)-month period; provided that the restrictions set forth in this Section 2.1.1(b)(iii) shall be of no further effect from and after such date.

(c) Withdrawal. A Holder may, by written notice to SpinCo, withdraw its Registrable Securities from a Demand Registration at least two Business Days prior to, or such lesser time in such Holder’s reasonable discretion up to, (i) in the case of a Demand Request in response to which SpinCo files a Registration Statement that is not a Shelf Registration Statement, effectiveness of the filing of the applicable Registration Statement or (ii) in the case of a Demand Request in response to which SpinCo files or utilizes a Shelf Registration Statement, the filing of the preliminary prospectus supplement related to the Shelf Registration Statement. Upon receipt of notices from all applicable Holders to such effect, SpinCo shall cease all efforts to seek effectiveness of the applicable Registration Statement, if applicable.

2.1.2 Shelf Registration. With respect to any Demand Registration, so long as SpinCo is eligible to use a Shelf Registration Statement, SpinCo shall effect a registration of the Registrable Securities under a registration statement on Form S-3 (or any similar or successor form) pursuant to Rule 415 under the Securities Act (or any successor rule) (such registration, a “Shelf Registration”).

2.1.3 Selection of Underwriters. At the request of the Holders of a majority of the Registrable Securities held by the Requesting Holders to be registered in a Demand Registration, the offering of Registrable Securities pursuant to a Demand Registration shall be in the form of a “firm commitment” Underwritten Offering or, at the sole discretion of such Holders following consultation with SpinCo, any other standard of Underwritten Offering. The Holders of a majority of the Registrable Securities to be registered in a Demand Registration shall select the investment banking firm or firms to manage the Underwritten Offering, provided that such selection shall be subject to the consent of SpinCo, which consent shall not be unreasonably withheld or delayed (except that such consent of SpinCo shall not be required at any time that RemainCo is the holder of a majority of the Registrable Securities to be so registered, provided, however, that RemainCo shall consult with SpinCo and consider SpinCo’s suggestions, if any, in good faith in connection with such selection). No Holder may participate in any registration pursuant to Section 2.1.1 unless such Holder (x) agrees to sell such Holder’s Registrable Securities requested by such Holder to be registered in a Demand Registration on the basis provided in any underwriting arrangements described above and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements; provided, however, that no such Holder shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Holder’s ownership of the Registrable Securities to be transferred by such Holder free and clear of all liens, claims, and encumbrances, (ii) such Holder’s power and authority to effect such transfer, and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested; provided further, however, that the obligation of such Holders to indemnify pursuant to any such underwriting arrangements shall be several, not joint and several, among such Holders selling Registrable Securities, and the liability of each such Holder will be in proportion to the respective number of Common Shares proposed to be sold or, if an Underwritten Offering is consummated, actually sold, by each such Holder; and provided further, however, that such liability of each Holder will be limited to the net amount received by such Holder from the sale of his or its Registrable Securities pursuant to such registration.

 

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2.1.4 Priority on Demand Registrations. If a registration pursuant to Section 2.1.1 or 2.1.2 above is an Underwritten Offering and the managing underwriters of such proposed Underwritten Offering advise the Holders in writing that, in their opinion, the number of securities requested to be included in such Underwritten Offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the number of securities to be included in such Underwritten Offering shall be reduced in the following order of priority: first, there shall be excluded from the Underwritten Offering any securities to be sold for the account of any selling securityholder other than the Holders; second, there shall be excluded from the Underwritten Offering any securities to be sold for the account of SpinCo; and finally, the number of Registrable Securities of any Holders that have been requested to be included therein shall be reduced, pro rata based on the number of Registrable Securities owned by each such Holder, in each case to the extent necessary to reduce the total number of securities to be included in such offering to the number recommended by the managing underwriters.

2.1.5 Deferral or Suspension of Filing. SpinCo may (x) defer the filing (but not the preparation), initial effectiveness or continued use of a registration statement required by Section 2.1 or Section 2.3, or (y) require the Holders to suspend any offerings of Registrable Securities pursuant to this Agreement, in the case of each clauses (x) and (y) until a date not later than sixty (60) days after the Required Filing Date of any such registration statement and not more than ninety (90) days in any twelve (12) month period in the aggregate (for all such deferrals or suspensions pursuant to this Section 2.1.5): (A) if SpinCo is subject to any of its customary suspension or blackout periods, for all or part of the period of such blackout period, (B) if any offering would occur during the period commencing 10 days prior to any of up to two (2) annual scheduled investor day presentations, for which notice was provided to RemainCo at least three (3) months in advance, and ending on the earlier of (1) two days after the furnishing to the SEC of the Form 8-K reporting the substance of such investor day presentation or (2) six (6) Business Days after such investor day presentation, or (C) if (i) at the time SpinCo receives the Demand Request, SpinCo or any of its subsidiaries are engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in such registration statement (but would not be required if such registration statement were not filed), and the Board of Directors of SpinCo or a committee of the Board of Directors of SpinCo determines in good faith that such disclosure would be materially detrimental to SpinCo and its stockholders, (ii) prior to receiving the Demand Request, SpinCo had determined to effect a registered underwritten public offering of SpinCo’s equity securities for SpinCo’s account and SpinCo had taken substantial steps (including, but not limited to, selecting a managing underwriter for such offering) and is proceeding with reasonable diligence to effect such offering, (iii) prior to receiving the Demand Request, SpinCo had determined to effect, on a reasonably prompt basis, a private offering of SpinCo’s equity securities for SpinCo’s account and SpinCo had taken substantial steps and is proceeding with reasonable diligence to effect such offering (each as confirmed to RemainCo in writing by inclusion of a representation to such effect in the certificate described below) or (iv) upon issuance by the SEC of a stop order suspending the effectiveness of any registration statement with respect to Registrable Securities or the initiation of proceedings with respect to such registration statement under Section 8(d) or 8(e) of the Securities Act; provided, however, that such a deferral in the case of clauses (ii) or (iii) above may occur only once, in the aggregate, in any twelve (12) month period, in addition to any other qualifications or limitations provided herein. A deferral of the filing of a registration statement pursuant to this Section 2.1.5 shall be lifted, and the requested registration statement shall be filed forthwith, if, in the case of a deferral pursuant to clause (i) of the preceding sentence, the negotiations or other activities are disclosed or terminated, or, in the case of a deferral pursuant to clause (ii) of the preceding sentence, the proposed registration for SpinCo’s account is abandoned, and SpinCo shall provide RemainCo prompt notice of such lifting following the occurrence of any such event. In order to defer the filing of a registration statement pursuant to this Section 2.1.5, SpinCo shall promptly (but in any event within ten (10) days), upon determining to seek such deferral, deliver to each Requesting Holder a certificate signed by an executive officer of SpinCo stating that SpinCo is deferring such filing pursuant to this Section 2.1.5 and a general statement of the reason for such deferral and an approximation of the anticipated delay. After receiving such certificate, the holders of a majority of the Registrable Securities held by the Requesting Holders and for which registration was previously requested may withdraw such Demand Request by giving notice to SpinCo; if withdrawn, the Demand Request shall be deemed not to have been made for all purposes of this Agreement. SpinCo may defer the filing of a particular registration statement pursuant to a single Demand Request delivered in accordance with this Section 2.1.5(a) only once.

 

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2.2. Piggyback Registrations.

2.2.1 Right to Piggyback. Each time SpinCo proposes to register any of its equity securities (other than pursuant to an Excluded Registration) under the Securities Act for sale to the public (whether for the account of SpinCo or the account of any securityholder of SpinCo) (a “Piggyback Registration”), SpinCo shall give prompt written notice to each Holder of Registrable Securities (which notice shall be given not less than seven (7) Business Days prior to the anticipated filing date of SpinCo’s registration statement), which notice shall offer each such Holder the opportunity to include any or all of its Registrable Securities in such registration statement, subject to the limitations contained in Section 2.2.2 hereof. Each Holder who desires to have its Registrable Securities included in such registration statement shall so advise SpinCo in writing (stating the number of shares desired to be registered) within three (3) Business Days after the date of such notice from SpinCo. Any Holder shall have the right to withdraw such Holder’s request for inclusion of such Holder’s Registrable Securities in any registration statement pursuant to this Section 2.2.1 by giving written notice to SpinCo of such withdrawal. Subject to Section 2.2.2 below, SpinCo shall include in such registration statement all such Registrable Securities so requested to be included therein; provided, however, that SpinCo may at any time withdraw or cease proceeding with any such registration if it shall at the same time withdraw or cease proceeding with the registration of all other equity securities originally proposed to be registered.

 

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2.2.2 Priority on Piggyback Registrations.

(a) If a Piggyback Registration is an underwritten offering and was initiated by SpinCo, and the managing underwriters of such proposed underwritten offering advise that, in their opinion, the number of securities requested to be included in such underwritten offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, SpinCo shall include in such registration statement (i) first, the securities SpinCo proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the Holders of such Registrable Securities on the basis of the number of Registrable Securities owned by each such Holder, and (iii) third, any other securities requested to be included in such registration, provided that if such other securities have been requested to be included pursuant to a registration rights agreement, then such securities would be included as set forth in (ii) above. If as a result of the provisions of this Section 2.2.2(a) any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested to be so included, such Holder may withdraw such Holder’s request to include Registrable Securities in such registration statement.

(b) If a Piggyback Registration is an underwritten offering and was initiated by a security holder of SpinCo (other than pursuant to an Excluded Registration), and the managing underwriters of such proposed underwritten offering advise that, in their opinion, the number of securities requested to be included in such underwritten offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, SpinCo shall include in such registration statement (i) first, the securities requested to be included therein by the security holders requesting such registration and the Registrable Securities requested to be included in such registration, pro rata among the holders of such securities on the basis of the number of securities owned by each such holder, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the Holders of such Registrable Securities on the basis of the number of Registrable Securities owned by each such Holder, and (iii) third, any other securities requested to be included in such registration (including securities to be sold for the account of SpinCo). If as a result of the provisions of this Section 2.2.2(b) any Holder shall not be entitled to include all Registrable Securities in a registration that such Holder has requested to be so included, such Holder may withdraw such Holder’s request to include Registrable Securities in such registration statement.

 

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(c) No Holder may participate in any registration statement in respect of a Piggyback Registration hereunder unless such Holder (x) agrees to sell such Holder’s Registrable Securities requested by such Holder to be included in such Piggyback Registration on the basis provided in any underwriting arrangements approved by SpinCo and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents, each in customary form, reasonably required under the terms of such underwriting arrangements; provided, however, that no such Holder shall be required to make any representations or warranties in connection with any such registration other than representations and warranties as to (i) such Holder’s ownership of the Registrable Securities to be sold or transferred by such Holder free and clear of all liens, claims, and encumbrances, (ii) such Holder’s power and authority to effect such transfer, and (iii) such matters pertaining to compliance with securities laws as may be reasonably requested; provided, further, however, that the obligation of such Holder to indemnify pursuant to any such underwriting arrangements shall be several, not joint and several, among such Holders selling Registrable Securities, and the liability of each such Holder will be in proportion to the respective number of Common Shares proposed to be sold in such Piggyback Registration, or, if an Underwritten Offering is consummated, actually sold, by each such Holder, and provided, further, that such liability will be limited to, the net amount received by such Holder from the sale of his or its Registrable Securities pursuant to such registration.

(d) Withdrawal. Each Holder shall have the right to withdraw such Holder’s request for inclusion of its Registrable Securities in any Underwritten Offering pursuant to this Section 2.2 at least two Business Days prior to, or such lesser time in such Holder’s reasonable discretion up to, (i) in the case of a Demand Request in response to which SpinCo files a Registration Statement that is not a Shelf Registration Statement, effectiveness of the filing of the applicable Registration Statement or (ii) in the case of a Demand Request in response to which SpinCo files or utilizes a Shelf Registration Statement, the filing of the preliminary prospectus supplement related to the Shelf Registration Statement.

2.3. Shelf Registration Statement.

2.3.1 Filing.

(a) At any time after the date on which SpinCo first becomes and so long as SpinCo remains eligible to use a Form S-3 (or any similar or successor form) as a Shelf Registration Statement, upon the written request of any Holder, SpinCo shall promptly (but no later than 45 days after the receipt of such request) file with the SEC a Shelf Registration Statement (which, if permitted, shall be an “automatic shelf registration statement” as defined in Rule 405 under the Securities Act) relating to the offer and sale by such Holder of all or part of the Registrable Securities. If at any time while Registrable Securities are outstanding, SpinCo files any Shelf Registration Statement for its own benefit or for the benefit of holders of any of its securities other than the Holders, SpinCo shall use its reasonable best efforts to include in such Shelf Registration Statement such disclosures as may be required under the Securities Act to ensure that the Holders may sell their Registrable Securities pursuant to such Shelf Registration Statement through the filing of a prospectus supplement rather than a post-effective amendment.

 

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(b) Effectiveness. SpinCo shall use its reasonable best efforts to (i) cause any such Shelf Registration Statement to be declared effective under the Securities Act as promptly as practicable after such Shelf Registration Statement is filed and (ii) keep any such Shelf Registration Statement (or a replacement Shelf Registration Statement) continuously effective and in compliance with the Securities Act and usable for the resale of Registrable Securities for the lesser of thirty-six (36) months or until such time as there are no Registrable Securities remaining.

(c) Sales by Holders. The plan of distribution contained in the Shelf Registration Statement referred to in this Section 2.3 (or related prospectus supplement) shall be determined by RemainCo, if RemainCo or an Affiliate of RemainCo is a Requesting Holder for such Shelf Registration Statement, or otherwise by the other Requesting Holder or Holders, subject to the reasonable review of and consent (not to be unreasonably delayed, conditioned or withheld) of SpinCo. Each Holder shall be entitled to sell Registrable Securities pursuant to the Shelf Registration Statement referred to in this Section 2.3 from time to time and at such times as such Holder shall determine. Such Holder shall promptly advise SpinCo of its intention so to sell Registrable Securities pursuant to the Shelf Registration Statement.

(d) Underwritten Offering. If any Holder intends to sell Registrable Securities pursuant to the Shelf Registration Statement referred to in this Section 2.3 through an Underwritten Offering, SpinCo shall take all steps to facilitate such an offering, including the actions required pursuant to Section 2.5 and Section 2.1.3, as appropriate; provided, that SpinCo will not be required to facilitate such Underwritten Offering unless so requested by RemainCo and unless such offering is for a number of Registrable Securities with a market value, as of the closing price of the day such Holder notifies SpinCo of its intention to conduct an Underwritten Offering, that is equal to at least $50,000,000.

2.3.2 Block Trade.

(a) To the extent that a Shelf Registration Statement is effective, RemainCo shall have the right to request that SpinCo file a prospectus supplement in connection with an Approved Block Trade, and the filing of such prospectus supplement shall not count as a Demand Registration.

(b) In connection with an Approved Block Trade, to the extent required by the relevant underwriters, SpinCo shall obtain so-called “comfort letters” from its independent public accountants, and legal opinions of counsel to SpinCo addressed to the underwriters, in customary form and covering such matters as are customarily covered by such letters and opinions and shall enter into such other agreements, including underwriting agreements in customary form. Delivery of any such opinions or comfort letters shall be subject to the recipient furnishing such written representations or acknowledgements as are customarily provided by underwriters who receive such comfort letters or opinions. In connection with an Approved Block Trade, SpinCo shall make available for inspection by (i) one authorized representative of RemainCo, (ii) any underwriter participating in an Approved Block Trade and (iii) each of their representatives, all financial and other information as shall be reasonably requested by them, and provide such persons the reasonable opportunity to discuss the business affairs of SpinCo with its principal executives and independent public accountants who have certified the audited financial statements included in the applicable Shelf Registration Statement in each case as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that the information that SpinCo determines, in good faith, to be confidential shall not be disclosed unless such person signs a confidentiality agreement reasonably satisfactory to SpinCo. In addition, SpinCo shall take such other actions as are reasonably required and customary in order to expedite or facilitate an Approved Block Trade.

 

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2.4. Holdback Agreements.

(a) SpinCo shall not effect any public or otherwise marketed sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 90-day period (or such lesser period as the lead or managing underwriters may reasonably require) beginning on (i) the effective date of any registration statement in connection with a Demand Registration or a Piggyback Registration (other than a Shelf Registration), or (ii) in the case of a Shelf Registration, the date of the filing of any prospectus relating to the offer and sale of Registrable Securities, except pursuant to any registrations on Form S-4 or Form S-8 or any similar or successor form or unless the underwriters managing any such public offering otherwise agree.

(b) If any Holder of Registrable Securities notifies SpinCo in writing that it intends to effect an Underwritten Offering of Common Stock registered pursuant to a Shelf Registration or otherwise pursuant to Article 2 hereof (including any Demand Registration), SpinCo shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for its equity securities, during the seven days prior to and during the 90-day period (or such lesser period as the lead or managing underwriters may reasonably require) beginning on (i) the effective date of any registration statement in connection with a Demand Registration or a Piggyback Registration (other than a Shelf Registration), or (ii) in the case of a Shelf Registration, the date of the filing of any prospectus relating to the offer and sale of Registrable Securities, except pursuant to registrations on Form S-4 or Form S-8 or any similar or successor form or unless the underwriters managing any such public offering otherwise agree. Subject to the conditions described in the preceding sentence, if so requested by the managing underwriters of such Underwritten Offering, SpinCo agrees to enter into a customary lock-up agreement with the underwriters for the same period, subject to customary exceptions. If so requested by the managing underwriter of such Underwritten Offering, SpinCo shall cause its directors and executive officers to enter into customary lock-up agreements with the underwriters for the same period, subject to customary exceptions.

(c) In the event of an Underwritten Offering by SpinCo (whether for the account of SpinCo or otherwise), each Holder of Registrable Securities shall consider in good faith any request by the lead or managing underwriters for such Underwritten Offering to enter into a customary lock-up agreement with the lead or managing underwriters for such Underwritten Offering, in customary form and subject to customary exceptions, pursuant to which such Holder shall, if such Holder agrees to enter into such lock-up agreement in its sole discretion, agree not to offer, sell, contract to sell or otherwise dispose of any Registrable Securities, or any securities convertible into or exchangeable or exercisable for such securities, including any sale pursuant to Rule 144 under the Securities Act (except as part of such Underwritten Offering), during the seven days prior to, and during the 90-day period (or such lesser period as the lead or managing underwriters may require) beginning on, the effective date of the registration statement for such Underwritten Offering (or, in the case of an offering pursuant to an effective shelf registration statement pursuant to Rule 415, the pricing date for such Underwritten Offering); provided, that such restrictions shall not apply in any circumstance to (i) securities acquired by a Holder in the public market subsequent to the date hereof, (ii) distributions-in-kind to a Holder’s limited or other partners, members, shareholders or other equity holders, and (iii) transfers by RemainCo to any of its Subsidiaries or any other Permitted Transferee. Notwithstanding the foregoing, Holders shall not be required to enter into or consider, in good faith or otherwise, entering into any lock-up agreements of the type contemplated by this Section 2.4(c) unless each of SpinCo’s directors, executive officers and holders of 5% or more of the outstanding Common Stock agrees to be bound by a substantially identical holdback agreement for at least the same period of time.

 

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2.5. Registration Procedures. Whenever any Holder has requested that any Registrable Securities be registered pursuant to this Agreement, SpinCo will use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as promptly as is practicable, and pursuant thereto SpinCo will as expeditiously as possible:

(i) prepare and file with the SEC, pursuant to Section 2.1.1(b) with respect to any Demand Registration, a registration statement on any appropriate form under the Securities Act with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, provided that as far in advance as practicable before filing such registration statement or any amendment thereto, SpinCo will furnish to the selling Holders copies of reasonably complete drafts of all such documents prepared to be filed (including exhibits), and any such Holder shall have the opportunity to object to any information contained therein and SpinCo will make corrections reasonably requested by such Holder with respect to such information prior to filing any such registration statement or amendment;

(ii) except in the case of a Shelf Registration, prepare and file with the SEC such amendments, post-effective amendments, and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than two hundred seventy (270) days (or such lesser period as is necessary for the underwriters in an Underwritten Offering to sell unsold allotments or such greater period as otherwise provided herein) and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement;

(iii) in the case of a Shelf Registration, use reasonable best efforts to prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities subject thereto for a period ending on the earlier of (x) 36 months after the effective date of such registration statement and (y) the date on which all the Registrable Securities subject thereto have been sold pursuant to such registration statement;

 

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(iv) furnish to each seller of Registrable Securities and the underwriters of the securities being registered such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus), any prospectus supplement, any documents incorporated by reference therein and such other documents as such seller or underwriters may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller or the sale of such securities by such underwriters (it being understood that, subject to Section 2.6 and the requirements of the Securities Act and applicable state securities laws, SpinCo consents to the use of the prospectus and any amendment or supplement thereto by each seller and the underwriters in connection with the offering and sale of the Registrable Securities covered by the registration statement of which such prospectus, amendment or supplement is a part);

(v) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as the managing underwriter reasonably requests (or, in the event the registration statement does not relate to an Underwritten Offering, as the holders of a majority of such Registrable Securities may reasonably request); use its reasonable best efforts to keep each such registration or qualification (or exemption therefrom) effective during the period in which such registration statement is required to be kept effective; and do any and all other acts and things which may be reasonably necessary or advisable to enable each seller to consummate the disposition of the Registrable Securities owned by such seller in such jurisdictions (provided, however, that SpinCo will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph or (B) consent to general service of process in any such jurisdiction);

(vi) promptly notify each seller and each underwriter and (if requested by any such Person) confirm such notice in writing (A) when a prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to a registration statement or any post-effective amendment, when the same has become effective, (B) of the issuance by any state securities or other regulatory authority of any order suspending the qualification or exemption from qualification of any of the Registrable Securities under state securities or “blue sky” laws or the initiation of any proceedings for that purpose, and (C) of the happening of any event which makes any statement made in a registration statement or related prospectus untrue or which requires the making of any changes in such registration statement, prospectus or documents so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as practicable thereafter, prepare and file with the SEC and furnish a supplement or amendment to such prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

 

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(vii) permit any selling Holder, which in such Holder’s sole judgment with consultation of SpinCo, might reasonably be deemed to be an underwriter or a controlling person of SpinCo, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to SpinCo in writing, which in the reasonable judgment of such Holder and its counsel should be included;

(viii) make reasonably available members of management of SpinCo, as selected by the Holders of a majority of the Registrable Securities included in such registration, for assistance in the selling effort relating to the Registrable Securities covered by such registration, including, but not limited to, the participation of such members of SpinCo’s management in road show presentations;

(ix) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection with the registration and sale of such Registrable Securities, including the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder, and make generally available to SpinCo’s securityholders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than thirty (30) days after the end of the twelve (12) month period beginning with the first day of SpinCo’s first fiscal quarter commencing after the effective date of a registration statement, which earnings statement shall cover said twelve (12) month period, and which requirement will be deemed to be satisfied if SpinCo timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act;

(x) if requested by the managing underwriter or any seller, promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or any seller reasonably requests to be included therein, including, without limitation, with respect to the Registrable Securities being sold by such seller, the purchase price being paid therefor by the underwriters and with respect to any other terms of the Underwritten Offering of the Registrable Securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or post-effective amendment;

(xi) as promptly as practicable after filing with the SEC of any document which is incorporated by reference into a registration statement (in the form in which it was incorporated), if not publically available in electronic format on the SEC’s EDGAR database, deliver a copy of each such document to each seller;

(xii) to the extent Registrable Securities are in certificated form, cooperate with the sellers and the managing underwriter to facilitate the timely preparation and delivery of certificates (which shall not bear any restrictive legends unless required under applicable law) representing securities sold under any registration statement, and enable such securities to be in such denominations and registered in such names as the managing underwriter or such sellers may request and keep available and make available to SpinCo’s transfer agent prior to the effectiveness of such registration statement a supply of such certificates;

 

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(xiii) promptly make available for inspection by any seller, any underwriter participating in any disposition pursuant to any registration statement, and any attorney, accountant or other agent or representative retained by any such seller or underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of SpinCo (collectively, the “Records”), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause SpinCo’s officers, directors and employees to supply all information requested by any such Inspector in connection with such registration statement; provided, however, that, unless the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the registration statement or the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, SpinCo shall not be required to provide any information under this subparagraph (x) if (A) SpinCo believes, after consultation with counsel for SpinCo, that either (1) the requested Records constitute confidential commercial and/or supervisory information within the meaning of 5 U.S.C. §§ 552(b)(4) and (8), or (2) to do so would cause SpinCo to forfeit an attorney-client privilege that was applicable to such information, or (B) if either (1) SpinCo has requested and been granted from the SEC confidential treatment of such information contained in any filing with the SEC or documents provided supplementally or otherwise or (2) SpinCo reasonably determines in good faith that such Records are not confidential commercial and/or supervisory information as provided in clause (A)(1) above but are otherwise confidential and so notifies the Inspectors in writing, unless prior to furnishing any such information with respect to clause (B) such Holder of Registrable Securities requesting such information agrees to enter into a confidentiality agreement in customary form and subject to customary exceptions; and provided, further, that each Holder of Registrable Securities agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to SpinCo and allow SpinCo, at its expense, to undertake appropriate action and to prevent disclosure of the Records deemed confidential;

(xiv) furnish to each seller and underwriter a signed counterpart of (A) an opinion or opinions of counsel to SpinCo, and (B) a comfort letter or comfort letters from SpinCo’s independent public accountants (unless such accountant shall be prohibited from so addressing such letters to any recipient contemplated above by applicable standards of the accounting profession), each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the sellers or managing underwriter reasonably requests, and in each case subject to the recipient furnishing such written representations or acknowledgements as are customarily provided by underwriters who receive such comfort letters or opinions;

(xv) cause the Registrable Securities included in any registration statement to be (A) listed on each securities exchange, if any, on which similar securities issued by SpinCo are then listed, or (B) quoted on any inter-dealer quotation system if similar securities issued by SpinCo are quoted thereon;

(xvi) provide a transfer agent and registrar for all Registrable Securities registered hereunder;

 

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(xvii) cooperate with each seller and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the Financial Industry Regulatory Authority (“FINRA”);

(xviii) during the period when the prospectus is required to be delivered under the Securities Act, use reasonable best efforts to promptly file all documents required to be filed with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act;

(xix) notify each seller of Registrable Securities promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information;

(xx) enter into such agreements (including customary underwriting agreements) as are customary in connection with an underwritten registration; and

(xxi) advise each seller of such Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued.

2.6. Suspension of Dispositions. Each Holder agrees by acquisition of any Registrable Securities that, upon receipt of any notice (a “Suspension Notice”) from SpinCo of the happening of any event of the kind described in Section 2.5(vi)(C) such Holder will forthwith discontinue disposition of Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus, or until it is advised in writing (the “Advice”) by SpinCo that the use of the prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the prospectus, and, if so directed by SpinCo, such Holder will deliver to SpinCo all copies, other than permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event SpinCo shall give any such notice, the time period regarding the effectiveness of registration statements set forth in Sections 2.5(ii) and 2.5(iii) hereof shall be extended by the number of days during the period from and including the date of the giving of the Suspension Notice to and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus or the Advice. SpinCo shall use its reasonable best efforts and take such actions as are reasonably necessary to render the Advice as promptly as practicable.

2.7. Registration Expenses.

2.7.1 Demand Registrations. All reasonable, out-of-pocket fees and expenses incident to any Demand Registration or Shelf Registration including, without limitation, fees and expenses arising in connection with SpinCo’s performance of or compliance with this Article 2, all registration and filing fees, all fees and expenses associated with filings required to be made with FINRA (including, if applicable, the reasonable fees and expenses of any “qualified independent underwriter” as such term is defined in FINRA Rule 2720, and of its counsel), as may be required by the rules and regulations of FINRA, fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the Registrable Securities), rating agency fees, printing expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by a Holder of Registrable Securities), messenger and delivery expenses, the fees and expenses incurred in connection with any listing or quotation of the Registrable Securities, fees and expenses of counsel for SpinCo and its independent certified public accountants (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance), the fees and expenses of any special experts retained by SpinCo in connection with such registration, and any transfer taxes and underwriting discounts, commissions, or fees in connection with the sale of the Registrable Securities will be borne by the Holders pro rata on the basis of the number of shares so registered whether or not any registration statement becomes effective. All other costs, fees and expenses incident to SpinCo’s performance or compliance with this Agreement will be borne by SpinCo, and the fees and expenses of any counsel, accountants, or other persons retained or employed by any Holder will be borne by such Holder.

 

 

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2.7.2 Piggyback Registrations. All fees and expenses incident to any Piggyback Registration including, without limitation, fees and expenses arising in connection with SpinCo’s performance of or compliance with this Article 2, all registration and filing fees, all fees and expenses associated with filings required to be made with FINRA (including, if applicable, the reasonable fees and expenses of any “qualified independent underwriter” as such term is defined in FINRA Rule 2720, and of its counsel), as may be required by the rules and regulations of FINRA, fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualifications of the Registrable Securities), rating agency fees, printing expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with Depository Trust Company and of printing prospectuses), messenger and delivery expenses, the fees and expenses incurred in connection with any listing or quotation of the Registrable Securities, fees and expenses of counsel for SpinCo and its independent certified public accountants (including the expenses of any special audit or “cold comfort” letters required by or incident to such performance), the fees and expenses of any special experts retained by SpinCo in connection with such registration, and the fees and expenses of other persons retained by SpinCo will be borne by SpinCo (unless paid by a security holder that is not a Holder for whose account the registration is being effected) whether or not any registration statement becomes effective; provided, however, that any transfer taxes, underwriting discounts, commissions, or fees in connection with the sale of the Registrable Securities will be borne by the Holders pro rata on the basis of the number of shares so registered and the fees and expenses of any counsel, accountants, or other persons retained or employed by any Holder will be borne by such Holder.

2.7.3 Block Trades. RemainCo and SpinCo shall equally split the fees of SpinCo’s independent public accountants, and printing expenses associated with the preparation and distribution of the requested prospectuses and prospectus supplements associated with each Approved Block Trade. RemainCo shall pay all other costs and expenses associated with an Approved Block Trade, including all of its costs and expenses associated with such sales (including attorney fees of RemainCo and applicable stock transfer taxes and underwriting discounts and commissions) provided, however, that SpinCo shall pay the fees and expenses of its attorneys in connection with such Approved Block Trades.

 

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2.8. Indemnification.

2.8.1 Indemnification by SpinCo. SpinCo agrees to indemnify and reimburse, to the fullest extent permitted by law, each seller of Registrable Securities, and each of its employees, advisors, agents, representatives, partners, officers, and directors and each Person who controls such seller (within the meaning of the Securities Act or the Exchange Act) and any agent or investment advisor thereof (collectively, the “Seller Affiliates”) (A) against any and all losses, claims, damages, liabilities, and expenses, joint or several (including, without limitation, reasonable attorneys’ fees and disbursements except as limited by Section 2.8.3) based upon, arising out of, related to or resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus, or preliminary prospectus or any amendment thereof or supplement thereto, or any other disclosure document (including reports and other documents filed under the Exchange Act and any document incorporated by reference therein) or other document or report incident to any such registration, qualification or compliance, or based on any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, (B) against any and all loss, liability, claim, damage, and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission, and (C) against any and all costs and expenses (including reasonable fees and disbursements of counsel) as may be reasonably incurred in investigating, preparing, or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon, arising out of, related to or resulting from any such untrue statement or omission or alleged untrue statement or omission, or such violation of the Securities Act, Exchange Act or any state securities laws applicable to SpinCo, to the extent that any such expense or cost is not paid under subparagraph (A) or (B) above; except insofar as any such statements are made in reliance upon and in strict conformity with information furnished in writing to SpinCo by such seller or any Seller Affiliate for use therein or in the case of an offering that is not underwritten. The reimbursements required by this Section 2.8.1 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred.

2.8.2 Indemnification by Holders. In connection with any registration statement in which a seller of Registrable Securities is participating, each such seller will furnish to SpinCo in writing such information and affidavits in respect of such information as reasonably required by SpinCo for purposes of including relevant biographical, ownership and similar information as SpinCo reasonably requests for use in connection with any such registration statement or prospectus and, to the fullest extent permitted by law, each such seller will indemnify SpinCo and each of its employees, advisors, agents, representatives, partners, officers and directors and each Person who controls SpinCo (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and any agent or investment advisor thereof against any and all losses, claims, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees and disbursements except as limited by Section 2.8.3) based upon, arising out of, related to or resulting from any untrue or alleged untrue statement of a material fact contained in any registration statement, prospectus, or preliminary prospectus or any amendment thereof or supplement thereto, or any other disclosure document (including reports and other documents filed under the Exchange Act and any document incorporated by reference therein) or other document or report incident to any such registration, qualification or compliance, or based on any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission is made in reliance upon and in conformity with any information or affidavit so furnished in writing to SpinCo by such seller or any of its Seller Affiliates specifically for inclusion in the registration statement; provided that the obligation to indemnify will be several, not joint and several, among such sellers of Registrable Securities, and the liability of each such seller of Registrable Securities will be in proportion to, and will be limited to, the net amount received by such seller from the sale of Registrable Securities pursuant to such registration statement; provided, however, that such seller shall not be liable in any such case to the extent that prior to the filing of any such registration statement or prospectus or amendment thereof or supplement thereto, such seller has furnished in writing to SpinCo information expressly for use in such registration statement or prospectus or any amendment thereof or supplement thereto which corrected or made not misleading information previously furnished to SpinCo. In connection with an Underwritten Offering, SpinCo, if requested, will indemnify the underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Seller Affiliates and in such other manner as the underwriters may request in accordance with their standard practice. The reimbursements required by this Section 2.8.2 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred.

 

 

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2.8.3 Indemnification Procedures. Any Person entitled to indemnification hereunder will (A) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give such notice shall not limit the rights of such indemnified party except to the extent such failure to give such notice actually prejudices the indemnifying party in respect of such claim) provided further, that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure and (B) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that such indemnified party shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (X) the indemnifying party has agreed to pay such fees or expenses, or (Y) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such indemnified party. If such defense is not assumed by the indemnifying party as permitted hereunder, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). If such defense is assumed by the indemnifying party pursuant to the provisions hereof, such indemnifying party shall not settle or otherwise compromise the applicable claim unless (1) such settlement or compromise contains a full and unconditional release of the indemnified party or (2) the indemnified party otherwise consents in writing. An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party, a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and disbursements of such additional counsel or counsels. The indemnified party shall not have the right to settle an action without the consent of the indemnifying party.

 

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2.8.4 Contribution. Each party hereto agrees that, if for any reason the indemnification provisions contemplated by Section 2.8.1 or Section 2.8.2 are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities, or expenses (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, liabilities, or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the actions which resulted in the losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact has been made (or omitted) by, or relates to information supplied by such indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.8.4 were determined by pro rata allocation (even if the Holders or any underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 2.8.4. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities, or expenses (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or, except as provided in Section 2.8.3, defending any such action or claim. Notwithstanding the provisions of this Section 2.8.4, no Holder shall be required to contribute an amount greater than the dollar amount by which the net proceeds received by such Holder with respect to the sale of any Registrable Securities exceeds the amount of damages which such Holder has otherwise been required to pay by reason of any and all untrue or alleged untrue statements of material fact or omissions or alleged omissions of material fact made in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto related to such sale of Registrable Securities. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations in this Section 2.8.4 to contribute shall be several in proportion to the amount of Registrable Securities registered by them and not joint. If indemnification is available under this Section 2.8, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 2.8.1 and Section 2.8.2 without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 2.8.4 subject, in the case of the Holders, to the limited dollar amounts set forth in Section 2.8.2.

 

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2.8.5 Survival of Indemnification. The indemnification and contribution provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director, or controlling Person of such indemnified party and will survive the transfer of securities.

2.9. Transfer of Registration Rights. RemainCo and any Permitted Transferee may transfer all or any portion of its rights under this Agreement to any Permitted Transferee or any transferee of Registrable Securities constituting not less than 10% of the outstanding shares of Common Stock at the time of transfer upon such transferee’s agreeing to be bound by the terms of this Agreement. Any transfer of registration rights pursuant to this Section 2.9 from RemainCo or any Permitted Transferee to any person that is not an Affiliate of RemainCo shall be effective upon receipt by SpinCo of (i) written notice from the transferor stating the name and address of the transferee and identifying the number of Registrable Securities with respect to which rights under this Agreement are being transferred, and (ii) an executed copy of such transferee’s agreement referred to in the immediately preceding sentence.

2.10. Rule 144. SpinCo will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if SpinCo is not required to file such reports, will, upon the request of the Holders, make publicly available other information) and will take such further action as the Holders may reasonably request, all to the extent required from time to time to enable the Holders to sell Common Stock without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the reasonable request of any Holder, SpinCo will deliver to such Holder a written statement as to whether it has complied with such requirements and will, at its expense, forthwith upon the request of any such Holder, deliver to such Holder a certificate, signed by SpinCo’s principal financial officer, stating (a) SpinCo’s name, address and telephone number (including area code), (b) SpinCo’s Internal Revenue Service identification number, (c) SpinCo’s SEC file number, (d) the number of shares of each class of capital stock outstanding as shown by the most recent report or statement published by SpinCo, and (e) whether SpinCo has filed the reports required to be filed under the Exchange Act for a period of at least ninety (90) days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder.

2.11. Preservation of Rights. SpinCo will not (i) grant any registration rights to third parties which are more favorable than or inconsistent with the rights granted hereunder or (ii) enter into any agreement, take any action, or permit any change to occur, with respect to its securities that violates or subordinates the rights expressly granted to the Holders in this Agreement.

 

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ARTICLE 3

TERMINATION

3.1. Termination. The Holders may exercise the registration rights granted hereunder in such manner and proportions as they shall agree among themselves. The registration rights hereunder shall cease to apply to any particular Registrable Security when: (a) a registration statement with respect to the sale of such shares of Common Stock shall have become effective under the Securities Act and such shares of Common Stock shall have been disposed of in accordance with such registration statement; (b) such shares of Common Stock shall have been sold to the public pursuant to Rule 144 under the Securities Act (or any successor provision); (c) such shares of Common Stock shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by SpinCo and subsequent public distribution of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force; (d) such shares shall have ceased to be outstanding; or (e) the Holder of such Registrable Security holds less than two percent (2%) of the then issued and outstanding shares of Common Stock (determined, in the case of RemainCo or any of its direct or indirect Subsidiaries, as applicable, as the aggregate number of Registrable Securities held by RemainCo together with all of its direct or indirect Subsidiaries) and such Registrable Securities are eligible for sale pursuant to Rule 144 under the Securities Act (or any successor provision) without restriction. SpinCo shall promptly upon the request of any Holder furnish to such Holder evidence of the number of shares of Common Stock then outstanding.

ARTICLE 4

MISCELLANEOUS

4.1. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by facsimile or email with receipt confirmed (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 4.1):

If to RemainCo:

MetLife, Inc.

200 Park Avenue

New York, NY 10166

Attention: Adam Hodes, Executive Vice President, Mergers & Acquisitions

 

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with a copy to:

MetLife, Inc. 200 Park Avenue

New York, NY 10166

Attention: General Counsel

If to SpinCo:

Brighthouse Financial, Inc.

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attention: Eric T. Steigerwalt, President and CEO

with a copy to:

Brighthouse Financial, Inc.

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attention: Christine M. DeBiase, General Counsel and Secretary

If to any other Holder, the address indicated for such Holder in SpinCo’s stock transfer records with copies, so long as RemainCo owns any Registrable Securities, to RemainCo as provided above.

Any notice or communication hereunder shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if sent by facsimile or email; and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee).

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

4.2. Authority. Each of the parties hereto represents to the other that (i) it has the corporate power and authority to execute, deliver and perform this Agreement, (ii) the execution, delivery and performance of this Agreement by it has been duly authorized by all necessary corporate action and no such further action is required, (iii) it has duly and validly executed and delivered this Agreement, and (iv) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

4.3. Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York irrespective of the choice of laws principles of the State of New York other than Section 5-1401 of the General Obligations Law of the State of New York. Each party hereto submits to the non-exclusive jurisdiction of the courts of the State of New York sitting in the County of New York or the United States District Court for the Southern District of New York and the appellate courts having jurisdiction of appeals in such courts to resolve any dispute, controversy or claim arising out of, or relating to, the transactions contemplated by this Agreement, or the validity, interpretation, breach or termination of any provision of this Agreement.

 

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4.4. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.4.

4.5. Successors and Assigns. Except as otherwise expressly provided herein, this Agreement shall be binding upon and benefit SpinCo, each Holder, and their respective successors and assigns.

4.6. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto 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.

4.7. Remedies. The parties hereto hereby expressly recognize and acknowledge that immediate, extensive and irreparable damage would result, no adequate remedy at law would exist and damages would be difficult to determine in the event that any provision of this Agreement is not performed in accordance with its specific terms or otherwise breached. Therefore, in addition to, and not in limitation of, any other remedy available to any party, except as otherwise expressly provided herein, an aggrieved party under this Agreement shall be entitled to specific performance of the terms hereof and immediate injunctive relief, without the necessity of proving the inadequacy of money damages as a remedy. Neither party shall be required to obtain or furnish any bond or similar instrument in connection with or as a condition to obtaining or seeking any such remedy. For the avoidance of doubt, nothing in this Agreement shall diminish the availability of specific performance of the obligations under this Agreement or any other injunctive relief. Such remedies, and any and all other remedies provided for in this Agreement, shall be cumulative in nature and not exclusive and shall be in addition to any other remedies whatsoever which any party may otherwise have. Each of the parties hereto hereby acknowledges and agrees that it may be difficult to prove damages with reasonable certainty, that it may be difficult to procure suitable substitute performance, and that injunctive relief and/or specific performance will not cause an undue hardship to the parties. Each party hereto hereby further agrees that in the event of any action by the other party for specific performance or injunctive relief, it will not assert that a remedy at law or other remedy would be adequate or that specific performance or injunctive relief in respect of such breach or violation should not be available on the grounds that money damages are adequate or any other grounds.

 

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4.8. Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but such waiver shall be effective only if it is in a writing signed by the party against whom the existence of such waiver is asserted. Unless otherwise expressly provided in this Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. No failure by either party to take any action or assert any right or privilege hereunder shall be deemed to be a waiver of such right or privilege in the event of the continuation or repetition of the circumstances giving rise to such right unless expressly waived in writing by the party against whom the existence of such waiver is asserted.

4.9. Amendment. This Agreement may not be amended or modified in any respect except by a written agreement signed by SpinCo, RemainCo (so long as RemainCo owns any Common Stock) and the Holders of a majority of the then outstanding Registrable Securities.

4.10. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties to each such agreement in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or pdf shall be as effective as delivery of a manually executed counterpart of any such Agreement.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above.

 

METLIFE, INC.
By:    
  Name:
  Title:

 

BRIGHTHOUSE FINANCIAL, INC.
By:    
  Name:
  Title:

 

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EX-10.3

Exhibit 10.3

 

DATED                             , 2017

METLIFE INVESTMENT ADVISORS, LLC

AND

METLIFE INSURANCE COMPANY USA

 

 

FORM OF INVESTMENT MANAGEMENT AGREEMENT

 

 


TABLE OF CONTENTS

 

1.

   DEFINED TERMS      3   

2.

   APPOINTMENT      6   

3.

   CLIENT’S REPRESENTATIONS AND WARRANTIES      6   

4.

   INVESTMENT MANAGER’S REPRESENTATIONS AND WARRANTIES      8   

5.

   SCOPE OF AUTHORIZATION      10   

6.

   PORTFOLIO TRANSACTIONS      14   

7.

   REPORTS; RECORD AND AUDIT RIGHTS      14   

8.

   MATERIAL IMPACTS AND CONFLICTS      16   

9.

   INSTRUCTIONS AND CONFIDENTIALITY      17   

10.

   FEES AND EXPENSES      18   

11.

   ACKNOWLEDGMENTS AND CONSENTS      19   

12.

   INDEMNIFICATION OF INVESTMENT MANAGER      21   

13.

   STANDARD OF CARE; INVESTMENT MANAGER’S LIABILITIES      21   

14.

   INDEPENDENT CONTRACTOR      24   

15.

   CAPACITY OF PERSONNEL; FACILITIES      24   

16.

   TERM AND TERMINATION OF AGREEMENT      25   

17.

   GOVERNING LAW; SEVERABILITY; DISPUTE RESOLUTION; SUBMISSION TO JURISDICTION      26   

18.

   AMENDMENTS      27   

19.

   ENTIRE AGREEMENT      27   

20.

   NOTICES      27   

21.

   NO WAIVER      28   

22.

   SUCCESSORS AND ASSIGNS      28   

23.

   COUNTERPARTS      28   

 

1


SCHEDULE 1 – Authorized Persons

SCHEDULE 2 – Legal Entity Guidelines

SCHEDULE 3 – Schedule of Fees

SCHEDULE 4 – Notices

SCHEDULE 5 – Reports

SCHEDULE 6 – Consent by Electronic Delivery

SCHEDULE 7 – Middle Office Services

 

2


INVESTMENT MANAGEMENT AGREEMENT

METLIFE INVESTMENT ADVISORS, LLC, a limited liability company organized under the laws of the State of Delaware (“Investment Manager”), has agreed to provide METLIFE INSURANCE COMPANY USA, an insurance company organized under the laws of the State of Delaware (“Client”), with certain investment management and other services as further detailed in this investment management agreement (the “Agreement”), effective as of January 1, 2017 (the “Effective Date”).

RECITALS

WHEREAS, Client desires to utilize the investment and portfolio management services of Investment Manager and to enter into this Agreement;

WHEREAS, Investment Manager desires to accept its appointment as investment manager and to provide the Services (as defined below) on the terms, and subject to the conditions, contained in this Agreement; and

WHEREAS, Client has retained Brighthouse Services, LLC, a limited liability company organized under the laws of the State of Delaware (“Brighthouse Services”), pursuant to a Management Services Agreement (“Management Services Agreement”), under which Brighthouse Services shall provide certain investment supervisory and support services to Client and certain officers of Brighthouse Services shall be authorized to provide instructions and direction to Investment Manager regarding Investment Manager’s provision of Services hereunder.

NOW, THEREFORE, in consideration for the premises and covenants contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, have agreed as follows:

 

1. Defined Terms

 

1.1 As used herein, the following terms have the following meanings:

1933 Act” means the Securities Act of 1933, as amended.

1934 Act” means the Securities Exchange Act of 1934, as amended.

1940 Act” means the Investment Company Act of 1940, as amended.

Advisers Act” means the Investment Advisers Act of 1940, as amended.

Affiliated Company” means any entity that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with Investment Manager.

Agreement” has the meaning set forth in the preamble hereof.

ALM” means asset liability management.

Assets” means the assets allocated to Investment Manager by Client on the Effective Date, including any derivative instruments, and all other assets acquired by or on behalf of Client on or after the Effective Date, including any derivative instruments, in each case in accordance with the Guidelines and this Agreement.

Associated Person” means any employee, officer, manager or director of Investment Manager or its Affiliated Companies.

 

3


Authorized Person” has the meaning set forth in Section 3.1(h) hereof.

Borrower” means the borrower of securities in a securities lending transaction.

Brighthouse Services” has the meaning set forth in the recitals hereof.

brokers” has the meaning set forth in Section 6.1 hereof.

Capital Markets Activities” has the meaning set forth in Section 5.3.4 hereof.

Chapter 59” has the meaning set forth in Section 17.3 hereof.

Charges” means the sum of the Management Fee and Expenses.

Client” has the meaning set forth in the preamble hereof.

Client Broker” has the meaning set forth in Section 6.1 hereof.

Client Data” means all data and other information provided to Investment Manager by, or at the direction of, Client pursuant to this Agreement after the Effective Date, including any data and other information provided by third parties acting as agents or service providers to Client (including, without limitation, Brighthouse Services).

Code” means the Internal Revenue Code of 1986, as amended.

Commissioner” means the Delaware Commissioner of Insurance.

Confidential Information” means information provided by one party hereto to the other party in the course of the parties’ activities under this Agreement; provided, that Confidential Information shall not include (a) information generally available to or known by the public (other than as a result of its disclosure by the recipient party or its representatives or service providers in violation of the terms hereof); (b) information available to the recipient party from a source other than the disclosing party or its representatives or service providers, provided that such source is not known by the recipient party to be subject to an obligation of confidentiality with respect to such information; or (c) information independently acquired or developed by the recipient party without the recipient party violating any of its obligations under this Agreement.

Custodial Assets” has the meaning set forth in Section 5.5 hereof.

Custodian” has the meaning set forth in Section 5.5 hereof.

Effective Date” has the meaning set forth in the preamble hereof.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Expenses” has the meaning set forth in Section 10.2 hereof.

FATF” means the Financial Action Task Force on Money Laundering.

GA Derivatives Activities” has the meaning set forth in Section 5.3.2 hereof.

Guidelines” has the meaning set forth in Section 2.1 hereof.

Hedging Activities” has the meaning set forth in Section 5.3.3 hereof.

Initial Term” means the period beginning on the Effective Date and ending on the date which is 18 months after the date on which Investment Manager and its Affiliated Companies cease to, directly or indirectly, own, control or hold 50% or more of the outstanding common stock or other ownership interests of Client.

 

4


Investment Management Services” has the meaning set forth in Section 5.1 hereof.

Investment Manager” has the meaning set forth in the preamble hereof.

Investment Manager Indemnitee” has the meaning set forth in Section 12.1 hereof.

Investment Manager Proprietary Products” has the meaning set forth in Section 13.7 hereof.

Loaned Securities” has the meaning set forth in Section 13.5 hereof.

Losses” has the meaning set forth in Section 12.1 hereof.

Management Fee” has the meaning set forth in Section 10.1 hereof.

Management Services Agreement” has the meaning set forth in the recitals hereof.

Middle Office Services” has the meaning set forth in Section 5.1 hereof.

OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.

Permitted Confidants” means a party’s investment managers, beneficial owners, board members, accountants, attorneys, affiliates, agents and such other persons as mutually agreed by the parties.

Plan” has the meaning set forth in Section 3.1(l) hereof.

PMU Activities” has the meaning set forth in Section 5.3.1 hereof.

Portfolio Management Services” has the meaning set forth in Section 5.3 hereof.

Pricing Sources” has the meaning set forth in Section 5.7(b) hereof.

QIB” means a “qualified institutional buyer,” as such term is defined in Rule 144A(a)(1)(i) of the 1933 Act.

Replacement Securities” has the meaning set forth in Section 13.5.1 hereof.

SEC” means the Securities and Exchange Commission.

Securities Lending Activities” has the meaning set forth in Section 5.3.5 hereof.

Services” means the Investment Management Services, Middle Office Services, and Portfolio Management Services to be provided by Investment Manager to Client under this Agreement.

Tax” has the meaning set forth in Section 10.5 hereof.

Termination Date” has the meaning set forth in Section 16.4 hereof.

Third Party Products” has the meaning set forth in Section 13.7 hereof.

Third Party Vendors” has the meaning set forth in Section 13.7 hereof.

VA Derivatives Activities” has the meaning set forth in Section 5.3.3 hereof.

Valuation Information” has the meaning set forth in Section 5.7(b) hereof.

 

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2. Appointment

 

2.1 In reliance on Investment Manager’s representations and warranties contained in this Agreement, Client hereby appoints Investment Manager as investment manager for Client and to provide the Services on the terms and conditions set forth in this Agreement. Investment Manager hereby accepts the appointment and assumes responsibility for the management of the Assets. Investment Manager agrees to comply with the terms and conditions of this Agreement including, but not limited to, the legal entity guidelines set forth in Schedule 2 hereto, the ALM investment guidelines, the asset sector investment guidelines, the policies and guidelines referenced in each of the foregoing guidelines as well as certain other policies regarding investment restrictions or risk limits, in each case as previously provided to and approved by Investment Manager prior to the Effective Date (collectively, the “Guidelines”).

 

2.2 Client may upon not less than 10 calendar days prior written notice to Investment Manager, supplement, modify or amend the Guidelines; provided, such written notice contains the details of any such changes; provided further, that Client may not make any of the following changes to the Guidelines without the prior consent of Investment Manager: (1) the addition of a new investment type or strategy not covered by this Agreement on the Effective Date, (2) changes that Investment Manager reasonably determines it cannot accommodate due to market capacity constraints or (3) changes that Investment Manager determines would (a) cause Investment Manager to incur material additional expense or material obligation or (b) impact any Affiliated Company co-investment obligation or the terms pertaining to the investments on which such Affiliated Company may be obligated to invest. In the event that Investment Manager determines in its sole discretion that a proposed change to the Guidelines requires its consent pursuant to the previous sentence, Investment Manager shall promptly so notify Client. Notwithstanding the foregoing, Investment Manager shall have a reasonable amount of time to effectuate any changes to the Guidelines. Further, Client acknowledges that market disruption, lack of liquidity and restrictions on transfer or liquidation may significantly affect the amount of time it takes for Investment Manager to effect changes to the Guidelines.

 

3. Client’s Representations and Warranties

 

3.1 Client hereby represents and warrants to Investment Manager as follows:

 

  (a) Client is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation and has all requisite power and authority to own its property, to conduct its business as currently conducted and to execute and deliver, and to perform its obligations under, this Agreement.

 

  (b) Client has the power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Client and constitutes a legal, valid and binding obligation of Client, enforceable against Client in accordance with its terms, subject to any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles relating to enforceability. Other than those already obtained and disclosed to Investment Manager, no consent of any person or any license, permit, approval or authorization of, exemption by, report to, or registration, filing or declaration with, any governmental authority is required by Client in connection with the execution, delivery and performance of this Agreement. Any consents of any persons and any licenses, permits, approvals or authorizations of, exemptions by, reports to, or registrations, filings or declarations with, any governmental authority required to be obtained and maintained by Client in connection with this Agreement shall, to the extent necessary, be obtained and maintained by Client at all times during the term of this Agreement.

 

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  (c) Client has reviewed Investment Manager’s Form ADV which has previously been provided to Client, and Client acknowledges and understands the conflicts of interest disclosed therein.

 

  (d) Client has reviewed, understands and acknowledges the risks and conflicts of interest set forth in the disclosure document entitled Certain Risk Factors and Conflicts of Interest which has previously been provided to Client. Client has substantial knowledge and experience in business and financial matters and can bear the economic risk of its investments.

 

  (e) Client has anti-money laundering policies and procedures in place reasonably designed to verify the source of any funds that are used to purchase any Assets pursuant to this Agreement on or after the Effective Date.

 

  (f) Client does not know or have any reason to suspect that the monies being used by it to purchase Assets on or after the Effective Date are (i) derived from or related to any illegal activities, including but not limited to money laundering activities, or (ii) derived from, invested for the benefit of or related in any way to the governments of, or persons within, any country under a U.S. embargo enforced by OFAC. Client represents and covenants that neither Client, nor any person controlling, controlled by, or under common control with, Client, nor any person having a beneficial interest in the Assets, is a Prohibited Investor,1 and that Client is not investing on behalf, or for the benefit, of any Prohibited Investor.

 

  (g) The execution, delivery and performance of this Agreement by Client does not violate (i) any provision of any law or regulation binding on Client, (ii) any order, judgment or decree of any court or government authority binding on Client, (iii) the charter, by laws or any other governing document of Client or (iv) any material contract, indenture or other agreement, instrument or undertaking to which Client is a party or by which Client or any of its assets may be bound.

 

  (h) The signatory to this Agreement is an authorized person and the list of signatories, including certain officers of Brighthouse Services noted therein, and signatures attached hereto as Schedule 1 (each, an “Authorized Person”), which is certified by Client’s secretary or other appropriate person, constitutes the current valid signatories and signatures of such Authorized Persons. Any information Client has provided to Investment Manager in writing in relation to its status, residence and domicile for taxation purposes is complete and correct.

 

  (i) Client has notified Investment Manager of any and all separate agreements, including the transition services agreement between Brighthouse Services and MetLife Services and Solutions, LLC, and the Management Services Agreement, between Client and any third party that could affect Investment Manager’s provision of the Services hereunder.

 

1  Prohibited Investors” include: (1) a person or entity whose name appears on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC or prohibited under OFAC country sanctions, or any blocked persons list maintained by the SEC or other governmental or regulatory body as may become applicable to the Assets, (2) any Foreign Shell Bank (as defined in 31 C.F.R. § 1010.605(g)) other than a Regulated Affiliate (as defined in 31 C.F.R. § 1010.605(n)), and (3) any person or entity resident in or whose funds that are indirectly invested in the Assets are transferred from or through an account in a jurisdiction that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization, such as FATF, of which the U.S. is a member and with which designation the U.S. representative to the group or organization continues to concur. See http://www.fatf-gafi.org for FATF’s list of Non-Cooperative Countries and Territories.

 

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  (j) Client has complied and will continue to comply with all laws, rules and regulations having application to its business, properties and assets the violation of which could materially adversely affect Client’s or Investment Manager’s performance of its respective obligations under this Agreement.

 

  (k) Client shall timely perform or oversee the performance of all obligations identified in this Agreement as obligations of Client, including, without limitation, providing Investment Manager with all information and Client Data reasonably requested by Investment Manager from time to time.

 

  (l) Client is not an investment company (as that term is defined in the 1940 Act), and none of the Assets constitutes assets of (i) an employee benefit plan as defined in and subject to Title I of ERISA, (ii) a plan as defined in and subject to Section 4975 of the Code, (iii) a governmental, church or non-U.S. plan subject to any Federal, State, local or non-U.S. law substantially similar to Section 406 of ERISA or Section 4975 of the Code (each of the foregoing, a “Plan”), or (iv) any entity the assets of which constitute assets of any such Plan.

 

  (m) Client is a “qualified client” as that term is defined in Rule 205-3(d)(1) of the Advisers Act.

 

  (n) Client is an “accredited investor” in accordance with Rule 501 of Regulation D promulgated under the 1933 Act. Client agrees to promptly notify Investment Manager in writing if Client ceases to be an accredited investor and further agrees to provide such evidence of its status as an accredited investor as Investment Manager may reasonably request from time to time.

 

  (o) Client is a QIB. Client agrees to promptly notify Investment Manager in writing if Client ceases to be a QIB and further agrees to provide such evidence of its status as a QIB as Investment Manager may reasonably request from time to time.

 

  (p) Client is a “qualified purchaser” within the meaning of Section 2(a)(51) of the 1940 Act and the rules thereunder.

 

3.2 The foregoing representations and warranties shall be continuing during the term of this Agreement and shall survive the termination of this Agreement in respect of any matter arising while this Agreement was in effect. Client hereby confirms that it is in compliance with its representations and warranties as contained herein, and agrees to promptly notify Investment Manager in writing in the event any of the foregoing representations or warranties becomes untrue.

 

4. Investment Manager’s Representations and Warranties

 

4.1 Investment Manager hereby represents and warrants to Client as follows:

 

  (a) Investment Manager is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation and has all requisite power and authority to own its property, to conduct its business as currently conducted and to execute and deliver, and to perform its obligations under, this Agreement.

 

  (b)

Investment Manager has the power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Investment Manager and constitutes a legal, valid and binding obligation of Investment Manager, enforceable against Investment Manager in accordance with its terms. Other than those already obtained and disclosed to Client,

 

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  no consent of any person or any license, permit, approval or authorization of, exemption by, report to, or registration, filing or declaration with, any governmental authority is required by Investment Manager in connection with the execution, delivery and performance of this Agreement. Any consents of any persons and any licenses, permits, approvals or authorizations of, exemptions by, reports to, or registrations, filings or declarations with, any governmental authority required to be obtained and maintained by Investment Manager in connection with this Agreement shall, to the extent necessary, be obtained and maintained by Investment Manager at all times during the term of this Agreement.

 

  (c) The execution, delivery and performance of this Agreement by Investment Manager does not violate (i) any provision of any law or regulation binding on Investment Manager, (ii) any order, judgment or decree of any court or government authority binding on Investment Manager, (iii) the charter, by laws or any other governing document of Investment Manager, or (iv) any material contract, indenture or other agreement, instrument or undertaking to which Investment Manager is a party or by which Investment Manager or any of its assets may be bound.

 

  (d) Investment Manager is registered with the SEC as an investment adviser under the Advisers Act, is registered or licensed as an investment adviser or otherwise under the laws of all jurisdictions in which its activities require it to be so registered or licensed to perform its obligations hereunder, and shall maintain such registrations and licenses at all times during the term of this Agreement. Investment Manager has provided Client with a copy of its most recent Form ADV. Investment Manager has put in place appropriate management systems and controls, which are subject to regular review and testing and which include, without limitation, appropriate disaster recovery procedures.

 

  (e) Investment Manager has in place a business continuity plan, which may be updated from time to time, that governs Investment Manager’s treatment of (i) material data processed by Investment Manager’s computer systems in the performance of its duties hereunder, and the retrieval of any such material data from Investment Manager’s back-up facilities, and (ii) the performance of its duties under this Agreement relating to contingency planning, disaster recovery, back-up processing, recovery time objective, resumption operating capacities, escalation, activation and crisis management procedures, cyber-security and such business continuity plan is subject to regular review and testing and is appropriate in light of Investment Manager’s business and its obligations hereunder.

 

  (f) Investment Manager has adopted and implemented written policies and procedures, as required by Rule 206(4)-7 under the Advisers Act, which are reasonably designed to prevent violations of federal securities laws by Investment Manager and its supervised persons. Investment Manager has provided Client with a summary of its compliance policies and procedures applicable to the performance of the Services, including those related to best execution, cross-trades and allocation of investments, and agrees to provide copies of any such other policies upon request of Client. Prior to relying on Section 28(e) of the 1934 Act with respect to the services provided under this Agreement, Investment Manager will provide Client with a copy of its soft dollar policy.

 

  (g) Investment Manager agrees that it will maintain at all times during the course of this Agreement, and for the period thereafter in which indemnification obligations hereunder could be triggered, a commercially reasonable level of errors and omissions and/or professional liability insurance coverage, taking into account the aggregate amount that it could potentially be required to pay based on actual or potential liabilities in connection with its obligations under this Agreement. Investment Manager shall, upon request, provide to Client certifications, or any other information that may reasonably be required, concerning the amount of or scope of such insurance coverage. Investment Manager agrees to promptly notify Client of any material decrease in the coverage amount or termination of the specified coverage, in each case as such coverage is in effect as of the Effective Date.

 

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  (h) Investment Manager will comply in all material respects with the legal and regulatory requirements applicable to the provision of the Services under this Agreement.

 

  (i) Investment Manager has sufficient and sufficiently qualified and knowledgeable personnel to perform the Services.

 

4.2 The foregoing representations and warranties shall be continuing during the term of this Agreement and shall survive the termination of this Agreement in respect of any matter arising while this Agreement was in effect. Investment Manager hereby confirms that it is in compliance with its representations and warranties as contained herein, and agrees to promptly notify Client in writing in the event any of the foregoing representations or warranties becomes untrue.

 

5. Scope of Authorization

 

5.1 Except as provided in Section 5.2 and subject to the supervision of and oversight by Client, Investment Manager will (a) provide Client with investment advice and investment supervision and will furnish Client with discretionary investment management services with respect to each class of investments and type of investment activity set forth in the Guidelines and described in this Agreement (collectively, the “Investment Management Services”) and (b) be responsible for decisions regarding, without limitation, the investment, reinvestment, hedging and disposition of the Assets, all in accordance with the Guidelines. In addition, Investment Manager shall also provide certain administrative services required to support the provision of Investment Management Services hereunder as set forth in Schedule 7 (the “Middle Office Services”).

 

5.2 Notwithstanding the foregoing, where the consent of Client is required under Section 206(3) of the Advisers Act or any other applicable law to effect principal transactions in which Investment Manager, on behalf of Client, purchases investments from, or sells investments to, Investment Manager or any of its Affiliated Companies and/or enters into agreements in connection therewith, Investment Manager shall request such consent from Client (in accordance with its Principal and Cross Transactions Policy as in effect from time to time) and shall not complete such transaction until such consent has been obtained. For the avoidance of doubt, each of the following shall constitute a principal transaction: (a) the purchase by Client of a loan participation issued by an Affiliated Company and the amount of any such participation or (b) the investment by Investment Manager, on behalf of Client, in any commingled fund managed by an Affiliated Company and the amount of any such capital commitment. After Client has authorized a principal transaction, subject to Section 5.6, Investment Manager shall have discretionary authority in accordance with this Agreement to take all actions and to exercise all rights and privileges in connection with any such investments, transactions or agreements. Except to the extent required by applicable law, neither Investment Manager nor any Affiliated Company with whom such transactions are placed shall have any obligation to account to Client for brokerage or other fees or profits arising from such investments, transactions or agreements.

 

5.3 Investment Manager shall also provide to Client certain additional portfolio management services (collectively, the “Portfolio Management Services”) in accordance with the Guidelines, including without limitation:

 

  5.3.1 General account portfolio management, including without limitation, constructing any asset class portfolio and analysis, supervision and optimization of such portfolio; providing ALM governance (including providing such consulting services as agreed between the parties from time to time in respect of the management by Client of its assets and liabilities, which may relate to, among other things, liquidity considerations, derivative strategies and investment risk assessment, analysis and modeling); selecting lending agents; developing strategies for any asset class and identifying new asset classes; and assisting in the development of new products (collectively, “PMU Activities”);

 

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  5.3.2 General account derivatives management, including without limitation, the structuring of derivatives programs, selection of derivative instruments and executing, settling and closing-out derivatives transactions (collectively, “GA Derivatives Activities”);

 

  5.3.3 Variable annuity derivatives management, including without limitation, the structuring of derivatives programs, selection of derivative instruments and executing, settling and closing-out derivatives transactions (collectively, “VA Derivatives Activities” and together with GA Derivatives Activities, “Hedging Activities”);

 

  5.3.4 Capital markets activities, including without limitation, assisting Client in raising funds through regulated insurance products and funding agreements (including commercial paper, global guaranteed investment contracts and federal agency secured borrowings) and reinvesting the proceeds thereof and managing the collateral borrowing arrangements involving such transactions, including, without limitation, with respect to any arrangements existing on the Effective Date (collectively, “Capital Markets Activities”); and

 

  5.3.5 Securities lending and repurchase transactions, including without limitation, acting as lending agent and managing and reinvesting cash collateral received in respect of such transactions in accordance with the terms of the relevant agreements (collectively, “Securities Lending Activities”).

 

5.4 Subject to the Guidelines and in furtherance of providing the Services, Client hereby grants Investment Manager the authority to act as agent and attorney-in-fact to (a) issue instructions to a broker-dealer or a Custodian to effect sales, purchases and securities lending and settle trades for and on behalf of Client solely in connection with the provision of Services to Client, (b) effect sales, purchases and securities lending and settle trades for and on behalf of Client solely in connection with the provision of Services to Client, (c) select counterparties to derivatives transactions and hedging instruments for such transactions, (d) open accounts with such counterparties as Investment Manager reasonably considers appropriate (including, where permissible in accordance with applicable law and regulation and only with the prior written consent of Client, Affiliated Companies) to facilitate the purchase, holding and sale of the Assets on behalf of Client and (e) execute all documentation necessary to effectuate sales, purchases and lending and settle trades in connection with the provision of Services to Client, in each case with the same right and authority as though Investment Manager were Client. As such, in accordance with the Guidelines, Investment Manager shall have full power to supervise, direct and/or effectuate the investment and disposition of the Assets as Investment Manager may reasonably deem appropriate.

 

5.5

(a) Certain securities and Client funds included in the Assets (“Custodial Assets”) shall be held by such Custodian(s) as notified by Client to Investment Manager from time to time. The “Custodian” means the person(s) appointed by Client and notified to Investment Manager, who will act as custodian(s) of the investments comprising the Custodial Assets from time to time and who is a “qualified custodian” as defined in Rule 206(4)-2 under the Advisers Act. Client understands and acknowledges that (i) in accordance with the applicable custodial agreement, Investment Manager may give instructions to the Custodian(s), in writing, by electronic means, by recorded telephone or recorded oral conversation or by such other means as Investment Manager may agree with the Custodian(s) from time to time, (ii) Client shall procure and shall be solely responsible for ensuring that Custodian complies with such instructions and (iii) Client shall instruct the Custodian to provide Investment Manager with such periodic reports concerning the status of the Custodial Assets as Investment Manager may reasonably request from time to time. In the event that Client intends to change the institution(s) that will serve as the Custodian(s), Client will provide Investment Manager reasonable prior notice of its intention to do so, together

 

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  with the name and other relevant information with respect to the new Custodian(s). The Custodian bears the sole responsibility for (x) safekeeping of the Custodial Assets, and (y) the consummation of all purchases, sales, deliveries and investments made pursuant to Investment Manager’s directions. Investment Manager shall not be liable to Client for (A) the acts, defaults or costs of any Custodian or any of its nominees, (B) any failure of a Custodian to perform its responsibilities with respect to the Custodial Assets, including, but not limited to, (i) any Losses that arise from the failure of a Custodian to notify Investment Manager of any notices affecting called investments, deadline expirations, dates and capital reorganization events affecting any investments that are included in the Custodial Assets or (ii) any Losses with respect to the transmittal or safekeeping of cash, securities or other assets.

(b) Client acknowledges that evidences of ownership of Assets other than Custodial Assets may be held in book-entry form in the possession of Investment Manager or an Affiliated Company, at the offices of the issuer or counterparty or otherwise in a manner consistent with industry practice.

 

5.6 (a) Subject to the Guidelines, Investment Manager shall be responsible for, and have discretionary power and authority to, vote on all matters, and to otherwise respond to requests for amendments, waivers, consents, corporate actions and other communications associated with the Assets including, without limitation, authority to take all actions and exercise all rights, privileges, votes or consents, pertaining to that certain Loan Participation Agreement, dated as of the 1st day of February, 2006 between Client and Metropolitan Life Insurance Company, as amended or superseded; provided, however, that Investment Manager shall seek the consent of Client with respect to (x) votes or consents pertaining to forgiveness of principal of any Asset or (y) votes or consents pertaining to prepayment of principal of any loan underlying any loan participation interest acquired by Client from an Affiliated Company. Investment Manager shall not be responsible or liable for failure to exercise such discretion to vote or failure to take any action with respect to requests for amendments, waivers, consents, corporate actions and other communications associated with the Assets unless such failure is due to its willful misconduct, gross negligence or bad faith and shall not incur any liability as a result of (i) Investment Manager not receiving any information required in relation to the exercise of voting rights or in relation to corporate actions or other communications relating to Assets from Client or the Custodian on a timely basis or (ii) votes or consents directed by Client.

(b) Notwithstanding the foregoing, Investment Manager shall delegate the power and authority to vote on any matters associated with Assets that are public equity securities for which there is an active trading market to a proxy voting service and shall instruct such proxy voting service to vote all such public equity Assets in accordance with such proxy voting service’s benchmark recommendations and guidelines. Investment Manager shall have no liability for the acts or omissions of such proxy voting service; provided, that such proxy voting service shall have been selected and monitored by Investment Manager with reasonable care.

(c) Investment Manager will promptly forward any notification of any right to vote or request to consent in relation to the Assets (other than public equity Assets) to Client, which (i) affects the interest rate payment of an Asset, (ii) negatively affects the tax outcomes of the relevant transaction or an Asset, (iii) impacts the maturity of an Asset, (iv) requires 100% lender consent or (v) Investment Manager reasonably considers, in its sole discretion, could have a material adverse effect on an Asset; provided, that such notice shall be for informational purposes only and shall not preclude Investment Manager from exercising its discretionary voting or consent rights and, subject to Section 13, Investment Manager shall not incur any liability for Losses arising from (x) delivering such notice or (y) exercising such rights except, in the case of clause (y) only, to the extent caused by or resulting from Investment Manager’s willful misconduct, gross negligence or bad faith.

 

5.7 (a) For purposes of calculating fees under Section 10, the Assets will be valued as described in Schedule 3. Subject to Section 13, Investment Manager shall not incur any liability resulting from valuing the Assets in accordance therewith.

 

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(b) Any other valuation of the Assets by Investment Manager shall be in accordance with Investment Manager’s internal valuation policies and/or methodologies, a description of which has previously been provided to Client; provided, however, that, subject to Section 13, Investment Manager shall not incur any liability resulting from valuing the Assets in accordance therewith. Investment Manager agrees to promptly furnish Client with a description of any changes to such valuation policies and/or methodologies made after the Effective Date. Investment Manager shall be entitled to reasonably rely on the price and value information (“Valuation Information”) provided by brokers and Custodians, sub-advisers (including, without limitation, the sponsor) of any underlying investment in which Client invests or any third party pricing services selected by Investment Manager (collectively, the “Pricing Sources”) in accordance with such valuation policies and methodologies (as applicable). Investment Manager shall have no obligation to obtain Valuation Information from any sources other than the Pricing Sources. Investment Manager shall have no liability or responsibility for the accuracy of the Valuation Information provided by a Pricing Source; provided, that such Pricing Source shall have been selected and monitored by Investment Manager with reasonable care.

 

5.8 Investment Manager is authorized, and has full discretion, to delegate any of its responsibilities, powers, discretions, duties and authority (including the power to sub-delegate such responsibilities, powers, discretions, duties and authority) to, or otherwise to utilize the services of, an Affiliated Company with respect to the Services set forth herein; provided, that any compensation payable to such Affiliated Company for such Services shall be borne by (and paid by) Investment Manager. Notwithstanding anything to the contrary contained herein, no delegation to, or utilization of, any Affiliated Company in respect of any Services shall relieve Investment Manager of any liability hereunder, and Investment Manager will be responsible for its obligations hereunder and remain fully accountable to Client for any acts or omissions of any such Affiliated Company, as if such acts or omissions were its own.

 

5.9 The parties acknowledge that Investment Manager may, upon prior written consent of Client, delegate to a third party investment manager the provision of Services hereunder in respect of any class of Assets.

 

5.10 Except as provided in Section 10.2, Investment Manager may, where reasonable and at no additional cost to Client, employ third party agents (including, without limitation, any third party bank, clearing organization, administrative agent, loan servicer, intermediary or nominee) to perform any administrative or ancillary services in connection with Investment Manager providing the Services hereunder, provided that any third party agent shall have been selected and monitored by Investment Manager with reasonable care.

 

5.11 Any changes in Client’s Authorized Persons will be effective upon receipt by Investment Manager of a revised list of Authorized Persons and evidence of the authority for any such change, together with a certification from Client’s secretary or other appropriate person.

 

5.12 Notwithstanding anything to the contrary herein, the business and operations of Client shall at all times be subject to the direction and control of the board of directors (or similar governing body) of Client. The activities of Investment Manager hereunder shall be subject to the supervision and oversight of Client, and Client shall monitor the performance of the Services by Investment Manager at least annually for quality assurance. In connection with the foregoing, Client acknowledges that it shall be relying on the Authorized Persons to exercise such supervision and oversight on Client’s behalf including, without limitation, through the implementation of appropriate guidelines and controls in respect of, and provision of directions to, Investment Manager, subject to the supervision of and oversight by the board of directors (or similar governing body) of Client. Client acknowledges, further, that it, and not Investment Manager, is responsible for ensuring that the Guidelines (including any supplementation, modification or amendment thereof) provided to Investment Manager comply with all legal and regulatory requirements applicable to Client.

 

5.13 Client shall be solely responsible for the accuracy, completeness and timeliness of all Client Data. All Client Data shall be provided to Investment Manager on a timely basis and in a format and medium reasonably requested by Investment Manager from time to time. Client shall have an ongoing obligation to promptly update, or use its reasonable endeavors to procure the prompt update of, all of its Client Data so that such information remains complete and accurate and shall use commercially reasonable efforts to cause its officers, advisors, distributors, legal counsel, independent auditors and accountants, Custodian(s), transfer agents, Brighthouse Services and any other service providers (including other investment managers and sub-advisers) to cooperate with Investment Manager and provide Investment Manager with such Client Data as may be reasonably requested by Investment Manager from time to time on a timely basis (pursuant to a calendar or as otherwise agreed by the parties). All Client Data shall be prepared and maintained by or on behalf of Client in accordance with applicable law and generally accepted accounting principles, and Investment Manager shall be entitled to rely on all Client Data.

 

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5.14 All Assets will remain the property of Client, will be held by the appropriate party for the benefit of Client and will be subject to the control of Client. The Assets do not represent under any circumstances property of Investment Manager.

 

6. Portfolio Transactions

 

6.1 Investment Manager may place orders for the execution of transactions with or through such brokers, dealers, banks, counterparties, electronic trading systems or futures commission merchants (“brokers”) as Investment Manager may select in its sole discretion, consistent with the Guidelines and Investment Manager’s Best Execution Policy and in compliance with applicable securities and commodities laws; provided, however, that Client may direct Investment Manager to use a particular broker with respect to Client’s investment securities transactions so long as (i) such broker is on Investment Manager’s approved broker list, (ii) documentation is in place to execute the trade with such broker and (iii) use of such broker would not violate any applicable laws or regulatory requirements (a “Client Broker”). Investment Manager has previously provided Client with a copy of its approved broker list and its Best Execution Policy and shall promptly provide Client with copies of any amendments thereto. Client hereby acknowledges that directing Investment Manager to use a particular Client Broker may limit Investment Manager’s ability to achieve best execution. To the extent permitted by law, Investment Manager may, but shall be under no obligation to, bunch or aggregate orders occurring at approximately the same time for Client with its own orders, those of any Affiliated Company or any other accounts or clients. Client hereby acknowledges and agrees that the effect of aggregation may work on some occasions in relation to a particular order to the disadvantage of Client. In the event of an aggregated order, the allocation of Assets so sold or purchased, as well as the expenses incurred in such transaction, shall be made by Investment Manager in accordance with Investment Manager’s allocation policies.

 

6.2 Investment Manager shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused Client to pay a broker that provides brokerage and research services (within the meaning of Section 28(e) of the 1934 Act) to Investment Manager an amount of commission for effecting an investment transaction in the Assets that is in excess of the amount of commission that another broker would have charged for effecting that transaction if, but only if, Investment Manager determines in good faith that such commission was reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of either that particular transaction or the overall responsibility of Investment Manager with respect to the accounts for which it exercises investment discretion (as such term is defined in Section 3(a)(35) of the 1934 Act). It is recognized that the services provided by such brokers may be used by Investment Manager in connection with Investment Manager’s services to other clients.

 

7. Reports; Record and Audit Rights

 

7.1 An initial list of the reports to be provided by Investment Manager to Client is attached hereto as Schedule 5. In addition, Investment Manager will provide any additional reports reasonably requested by Client from time to time; provided, that Investment Manager is able to prepare such additional reports without incurring any additional material expense. Notwithstanding the foregoing, Investment Manager shall have a reasonable amount of time to produce any such additional reports. At Client’s reasonable request, Investment Manager shall (i) review the Guidelines and communicate in writing to Client Investment Manager’s analysis and views of: (x) changes (if any) that, in Investment Manager’s judgment, should be made to the Guidelines and (y) the expected consequences of implementing such changes to the Guidelines on the future performance and investment characteristics of the Assets and (ii) upon Client’s reasonable notice to Investment Manager, make available portfolio managers to meet during regular business hours to discuss any present and future investment strategy, performance, valuation, risk and other matters.

 

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7.2 Investment Manager agrees to promptly furnish written notice to Client upon the occurrence of any of the following events: (i) a change to the financial condition of Investment Manager that could reasonably be expected to materially and adversely affect Investment Manager’s ability to perform the Services under this Agreement; (ii) a change in the portfolio manager(s) assigned to Client’s account or the senior managing directors with respect to any class of Assets set forth in the Guidelines or the chief investment officer of Investment Manager; (iii) the commencement of any investigation, examination, legal action or other proceeding involving Investment Manager by any governmental or regulatory agency that is outside of the scope of routine investigations, examinations or other proceedings that such agency conducts from time to time of businesses engaged in the same or similar activities as Investment Manager, that could reasonably be expected to materially and adversely affect Investment Manager’s ability to perform the Services under this Agreement; or (iv) the placement by any governmental or regulatory agency of limitations on the activities of Investment Manager that could reasonably be expected to materially and adversely affect Investment Manager’s ability to perform the Services under this Agreement.

 

7.3 Investment Manager shall keep and maintain complete and accurate books and records relating to the Investment Management Services and Portfolio Management Services, including each transaction concerning the Assets. All such records shall be kept in accordance with applicable laws and regulations, including, as applicable, the Advisers Act and the rules promulgated thereunder. Without limiting the foregoing, Investment Manager covenants to retain all historical financial information relating to any Assets as of the Effective Date for a period of seven years from the Effective Date. Investment Manager acknowledges that all books and records provided for pursuant to this Section 7.3 shall be the property of Client and shall be made available to Client, its accountants, auditors or other representatives of Client for inspection and/or copying in such format as may be reasonably requested by Client (at Client’s expense) upon Client’s written request and with reasonable notice to Investment Manager, during regular business hours. In addition, subject to any confidentiality restrictions imposed on Investment Manager, Investment Manager will provide any materials, reasonably related to the Services, as may be reasonably requested in writing by Client or as may be required by any state or federal insurance regulator or regulatory or quasi-regulatory authority having jurisdiction over Client. Client may audit Investment Manager, at Client’s sole expense and upon reasonable written notice to Investment Manager, during regular business hours, to ensure that security controls and operational management procedures in relation to the Services (including, for the avoidance of doubt, any enterprise-wide procedures applicable to the provision of Services hereunder) are in place as required by this Agreement; provided, however, that nothing herein will allow Client to review data pertaining to other clients of Investment Manager. In addition, Investment Manager shall deliver to Client a copy of any Statement on Standards for Attestation Engagements 16 report that is created for Investment Manager and that relates to any of the Services that Investment Manager provides to Client or any related controls. Investment Manager shall require any Affiliated Company it retains in accordance with Section 5.8 to agree to the above rights of audit, review and examination in relation to such delegate’s provision of Services to Client. Additionally, Investment Manager shall use commercially reasonable efforts to cause any third party delegate it retains in accordance with Section 5.9 to provide information as reasonably necessary in connection with any audit, review or examination by Client pursuant to this Section 7.3.

 

7.4 Investment Manager acknowledges that all books and records of Client are and shall remain the property of Client and are subject to the control of Client.

 

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8. Material Impacts and Conflicts

 

8.1 At all times subject to any provisions in the Guidelines and Section 5.2, Investment Manager and any Affiliated Company may, without prior reference to Client, effect investment transactions for Client in or with an entity in which Investment Manager or an Affiliated Company has directly or indirectly a material interest or a relationship of any description with another party which may involve an actual or potential conflict with Investment Manager’s duty to Client. Investment Manager shall not enter into such transactions unless it reasonably believes that such transactions will be effected on terms that are not materially less favorable to Client than if the conflict or potential conflict had not existed. In addition, potential conflicting interests or duties may arise because Investment Manager or an Affiliated Company undertakes investment management activities for another investor or investors with interests in the same types of investment classes as included in the Assets. Investment Manager acts as adviser to other clients and may give advice and take action with respect to any of those clients that may differ from the advice given, or the time or nature of action taken, with respect to such investments. Moreover, Investment Manager and its Affiliated Companies and Associated Persons may engage in investment transactions, or cause or advise other clients to engage in such transactions, which may differ from or be identical to transactions engaged in by Investment Manager with respect to the Assets, or may recommend any transaction which any of such Affiliated Companies or any Associated Persons may engage in for their own accounts or the account of any other client.

 

8.2 Affiliated Companies or other clients of Investment Manager may institute lawsuits on their own behalf based upon investments that Investment Manager has purchased for them, and Investment Manager may, in its sole and absolute discretion, provide Affiliated Companies or such other clients with assistance in such lawsuits, and Client shall have no rights with respect thereto, including in cases where any such lawsuit is against any issuer of any of the Assets or any Asset. Subject to any confidentiality restrictions imposed on Investment Manager and conflicts of interest, upon (i) Investment Manager’s becoming aware of any lawsuit involving the issuer of any of the Assets or any Asset, (ii) the decision by Investment Manager to participate in a creditors’ committee in respect of the issuer of any of the Assets or any Asset, (iii) the retention of counsel to represent Investment Manager, or a committee in which Investment Manager participates, in respect of the issuer of any of the Assets or any Asset or (iv) Investment Manager’s taking any other material actions, beyond preliminary discussions with other creditors or with an issuer, to seek to preserve or enhance an Asset’s value, Investment Manager will (a) make available to Client any information that may be relevant to the assertion of rights, if any, Client may have with respect thereto, (b) confer with Client and (c) where reasonably practicable, give Client such assistance as it may reasonably require to exercise its rights in any actions that Client decides to take in connection therewith; provided, however, that Investment Manager will not be required to search out potential legal claims, monitor class action lawsuits against issuers of any of the Assets or institute a lawsuit or take legal actions on Client’s behalf. Further, at the request of Client, Investment Manager shall provide reasonable assistance in working with brokers to resolve any claims Client may have against such brokers in connection with the Assets or the Services. Notwithstanding the foregoing, Investment Manager will not incur any liability for Losses resulting from any advice given or assistance rendered in connection with this Section 8.2, except to the extent caused by or resulting from Investment Manager’s willful misconduct or bad faith, and Investment Manager’s reasonable out-of-pocket costs (including outside legal and financial advisers) associated with such advice or assistance shall be paid for by Client.

 

8.3 Client hereby grants Investment Manager the authority to effect “agency cross” transactions for Client in accordance with its Principal and Cross Transactions Policy as in effect from time to time. Client acknowledges that Investment Manager and its Affiliated Companies may receive compensation from the other party to such transactions (the amount of which may vary) and that due to the receipt of such compensation, Investment Manager or its Affiliated Company will have a potentially conflicting division of loyalties and responsibilities regarding both parties to such transaction. Client understands that the consent to “agency cross” transactions contained herein can be revoked at any time by written notice to Investment Manager.

 

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9. Instructions and Confidentiality

 

9.1 Client authorizes and directs Investment Manager (a) to receive and implement requests, notices, consents and other instructions pursuant to this Agreement from any Brighthouse Services officer who is an Authorized Person to the same extent and with the same effect as if they had been provided by Client and (b) if directed by Client in writing, to provide reports and information to Brighthouse Services in lieu of or in addition to providing them to Client. No utilization of Brighthouse Services by Client shall relieve Client of any liability hereunder, and Client will be responsible for its obligations hereunder and remain fully accountable to Investment Manager for any acts or omissions of Brighthouse Services in connection with this Agreement, as if such acts or omissions were its own. Client bears the sole responsibility for acts or omissions taken by Investment Manager at the direction of any Brighthouse Services officer who is an Authorized Person, and Investment Manager shall not be responsible to Client for any Losses that arise from the failure of Brighthouse Services to perform its responsibilities to Client with respect to the Assets or Services hereunder including, but not limited to, any Losses that arise from the failure of Brighthouse Services to provide requests, notices, consents or other instructions to Investment Manager that are correct, complete or timely.

 

9.2 Investment Manager shall not be liable and shall be fully protected in relying upon any notice, instruction or other communication that is given to Investment Manager by an Authorized Person; provided, that if any such notice, instruction or other communication was delivered orally, such notice, instruction or other communication shall have been followed by a written confirmation of such notice, instruction or other communication within a reasonable amount of time. Investment Manager may request from an Authorized Person written instructions to further clarify or supplement the Guidelines or to clarify the provision of the Services.

 

9.3 No party shall use or disclose the other party’s Confidential Information except as contemplated by this Agreement.

 

9.4 Client covenants that Client shall at all times keep confidential and not, directly or indirectly, disclose, divulge, furnish or make accessible to anyone, or use in any manner that would be adverse to the interests of Investment Manager, any Confidential Information except (i) with the prior written approval of Investment Manager, (ii) with regard to information that is otherwise publicly available (other than information made publicly available by Client relying on this exemption in disclosing such information), (iii) to the extent required or requested by any state or federal insurance regulator, the National Association of Insurance Commissioners, the SEC, any stock exchange, clearinghouse or any similar organization or regulatory or quasi-regulatory authority having jurisdiction over Client or (iv) to the extent otherwise required by law, court order or any subpoena or similar legal process or in order to enforce rights under this Agreement.

 

9.5 Investment Manager covenants that Investment Manager shall at all times keep confidential and not, directly or indirectly, disclose, divulge, furnish or make accessible to anyone, or use in any manner that would be adverse to the interests of Client any Confidential Information, except (i) in connection with Investment Manager’s performance under this Agreement, (ii) with the prior written approval of Client, (iii) for information that is otherwise publicly available (other than information made publicly available by Investment Manager relying on this exemption in disclosing such information), (iv) to the extent required or requested by any state or federal insurance regulator, the SEC, any stock exchange, clearinghouse or any similar organization or regulatory or quasi-regulatory authority having jurisdiction over Investment Manager or its Affiliated Companies or (v) to the extent otherwise required by law, court order or any subpoena or similar legal process or in order to enforce rights under this Agreement.

 

9.6 Before any disclosure of information otherwise subject to Section 9.4 or Section 9.5 on the grounds that such information has otherwise become publicly available or that such disclosure is required by law or to comply with a governmental or regulatory request, a request by any quasi-regulatory body, a court order or any subpoena or similar legal process or in order to enforce rights under this Agreement, the disclosing party shall inform the other party and shall give such other party, to the extent reasonably practicable, an opportunity, at its own expense, to contest whether such information has in fact met that standard. The parties shall only disclose such information if, and to the extent that, such disclosure is affirmatively determined to be permitted on the basis of such information otherwise having been so made publicly available or the disclosure being required by law or to comply with a governmental or regulatory request or court order or in order to enforce rights under this Agreement.

 

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9.7 Notwithstanding the foregoing, each party may share the other party’s Confidential Information with its Permitted Confidants; provided, that its Permitted Confidants undertake to hold such information strictly confidential to the same extent set forth herein, and not in any manner or respect to use any of such information for their personal gain or to the detriment of the other party; and provided, further, that each party accepts full liability for any use or disclosure of such information by its Permitted Confidants. For the avoidance of doubt, Investment Manager may provide detailed information, including information about individual investments made on behalf of Client pursuant to this Agreement, to Permitted Confidants in connection with any verification of Investment Manager’s track record or for any other accounting, reporting or auditing purposes.

 

9.8 Each party shall implement and maintain written administrative, physical and technical safeguards reasonably and appropriately designed to protect the confidentiality, integrity and availability of Confidential Information. Each party shall provide reasonable assistance and cooperation to mitigate, to the extent practicable, any harmful effect related to the unauthorized use, access or disclosure of Confidential Information. Each party shall promptly notify the other party of any incident reasonably believed to have resulted in the unauthorized use, access or disclosure of Confidential Information.

 

9.9 Except as otherwise expressly provided in this Agreement, neither party will use the other party’s name or any of the other party’s trademarks, service marks, logos, designs or other proprietary designations in any advertising or promotional material or otherwise without first obtaining the approval in writing of the other party; provided, that Investment Manager shall be permitted to reference Client and the Services hereunder in any offering or related materials where reference thereto is required or customary; and provided, further, that each shall be permitted to reference the other and this Agreement as necessary or appropriate in regulatory filings. Notwithstanding the foregoing, Investment Manager and its Affiliated Companies may disclose the identity of Client in marketing materials, including, as part of any representative list of clients, and in the course of performing the Services. The foregoing is not intended to prohibit or preclude Client or its affiliates from entering into an agreement with an Affiliated Company regarding use of the Affiliated Company’s name, trademarks, service marks, logos, designs or other proprietary designations.

 

10. Fees and Expenses

 

10.1 Subject to adjustments made in accordance with Section 16.2, Investment Manager’s management fee (the “Management Fee”) for the Services rendered hereunder shall be (i) calculated quarterly in arrears by multiplying (x) 0.25 times (y) the applicable fee owing pursuant to Schedule 3 and (ii) paid as set forth in Schedule 3 and this Section 10.

 

10.2 Client shall be responsible for all (i) fees and expenses incurred in the use of any proxy voting services retained pursuant to Section 5.6(b), (ii) reasonable out of pocket costs arising from any advice or assistance provided by Investment Manager pursuant to Section 8.2, (iii) third party expenses incurred in connection with due diligence, legal, servicing and custodial expenses pertaining to potential and closed investments by Client in residential mortgage whole loans, (iv) third party expenses incurred in connection with due diligence and legal expenses pertaining to potential and closed investments by Client in commercial real estate mortgage whole loans, agricultural mortgage whole loans and co-lending arrangements with respect to commercial real estate mortgage loans and/or agricultural mortgage loans, and (v) third party custodial expenses incurred in connection with any securities (collectively, “Expenses”).

 

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10.3 Investment Manager shall submit to Client within 30 days after the end of each calendar quarter, a written statement showing in reasonable detail the Charges due from Client for the Services provided in the preceding quarter. Any balance payable as shown in such statement shall be paid within 30 days following receipt of such written statement by Client. Notwithstanding the foregoing, Investment Manager shall submit to Client within 30 days after the end of each month, a written good faith estimate of the Charges attributable to the Services provided in the preceding calendar month. The settlement of any balance payable pursuant to this Section 10.3 shall be in accordance with the requirements in the National Association of Insurance Commissioners’ Accounting Practices and Procedures Manual. Other than in respect of satisfying Client’s obligations under this Agreement, Client shall not be obligated to advance any funds to Investment Manager pursuant to this Agreement.

 

10.4 Notwithstanding anything to the contrary herein, if Client objects to any determination of actual Charges made by Investment Manager, it shall so advise Investment Manager within 30 days after receipt of notice of said determination. If the parties cannot reconcile such objection, they shall mutually agree to the selection of a firm of independent certified public accountants which shall determine the Charges properly allocable to Client and shall, within a reasonable time, submit such determination together with the basis therefor, in writing to Investment Manager and Client, whereupon such determination shall be binding. The expenses of such determination by a firm of independent certified public accountants shall be borne equally by Investment Manager and Client.

 

10.5 All payments to be made by Client hereunder shall be made free and clear of and without deduction or withholding for any present or future taxes, duties, levies, assessments or other governmental charges of similar nature now or hereafter imposed (“Tax”) on such payments unless such deduction or withholding is required by applicable law. If Client is required by law to make any deduction or withholding from any sum payable hereunder, the sum payable in respect of which such deduction or withholding shall be made shall be increased to the extent necessary to ensure that after the making of such deduction or withholding, Investment Manager will receive a net sum, which is equal to the sum which would have been received and so retained had no such deduction or withholding been made. To the extent Client is required to make a remittance of such Tax to a government authority in respect of a deduction or withholding required to be made after the sum payable has been increased as provided above, Client shall provide to Investment Manager (i) an official receipt issued by the relevant government authority regarding such Tax, or (ii) other documentary proof of payment of said deduction or withholding if no official receipt is issued by such taxing or other authority. If Investment Manager has received or been granted a refund of such Tax, then Investment Manager shall, to the extent that it can do so without prejudice to the retention of the amount of such refund, reimburse to Client such amount as Investment Manager shall, in its sole discretion, determine to be attributable to the relevant Tax or deduction or withholding.

 

11. Acknowledgments and Consents

 

11.1 Client hereby acknowledges and consents to the following:

 

  (a) Neither Investment Manager nor any Affiliated Company is obliged to disclose to Client any information if the disclosure of such information by Investment Manager or the Affiliated Company to Client would or might reasonably constitute a breach of duty or confidence to any other person. Subject to the proceeding sentence, the parties agree to provide to each other, within a reasonable time, any further information requested by the other party for regulatory or tax considerations.

 

  (b) Client understands that the investment of its funds authorized hereunder may lead to loss or to profit and no representation is made by Investment Manager that no such losses will occur. No warranty is given by Investment Manager as to the performance or profitability of any Assets; provided, that the absence of any such warranty shall not affect Investment Manager’s duty to use reasonable care. Investment Manager is entitled to assume that Client has the necessary level of experience and knowledge to understand the risks involved in the Services provided hereunder and the transactions carried out by Investment Manager on behalf of Client and in accordance with the Guidelines, and that Client is able financially to bear any related investment risks consistent with its investment objectives.

 

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  (c) Any benchmarks and/or targeted rates of return (if any) associated with the Investment Management Services or Portfolio Management Services being provided pursuant to this Agreement or that may be referred to in the Guidelines are for measurement purposes only, and any such specific investment objectives are targets only, and Investment Manager shall have no duty to Client or to any third party to meet or outperform, and accordingly shall have no liability for failure to meet or outperform, any such benchmark, targeted rate of return, or investment objective.

 

  (d) Client acknowledges that Investment Manager makes no representation regarding the appropriateness of the investments made and Services provided hereunder for Client’s particular needs or regulatory constraints; provided, that the absence of such a representation shall not limit or otherwise affect Investment Manager’s duties and obligations under this Agreement; and provided, further, that Investment Manager shall invest Client’s assets only in accordance with the Guidelines.

 

  (e) Investment Manager will allocate investment opportunities among its clients where there is a limited supply of a security in accordance with its allocation policies (as they may be amended from time to time), copies of which have previously been provided to Client. Investment Manager agrees to promptly furnish Client with copies of any amendments to the allocation policies made after the Effective Date. Client acknowledges to Investment Manager that any and all loan participation investment opportunities afforded to Client from Affiliated Companies will be at the sole discretion of such Affiliated Companies as lead lenders of the underlying loans.

 

  (f) By reason of Investment Manager’s relationships with Client and with other clients, and activities of its Affiliated Companies, Investment Manager may acquire confidential information regarding certain entities and securities and/or otherwise be restricted from initiating transactions in certain securities. Client acknowledges and agrees that Investment Manager will not be free to divulge to Client, or to act upon, any such confidential information with respect to Investment Manager’s performance of this Agreement and that, due to such a restriction, Investment Manager may not initiate a transaction that Investment Manager otherwise might have initiated.

 

  (g) Client acknowledges that, except as otherwise expressly specified in the Guidelines, the Guidelines apply at the time of purchase of Assets only, and failure to comply with any specific guideline or restriction contained therein because of market fluctuation, changes in the capital structure of any company that is an issuer of an investment included in the Assets, ratings agency or credit ratings changes or withdrawals or other events outside of Investment Manager’s control will not be deemed a breach of the Guidelines or this Agreement.

 

  (h) Client consents to receive any documents required to be sent under this Agreement, including any documents required to be sent under the Advisers Act (including, without limitation, Investment Manager’s disclosure brochure and brochure supplements (and any updates thereto) as set forth on Part 2 of Form ADV), by electronic delivery. Client understands that such consent can be revoked at any time. Details regarding such consent are provided in Schedule 6.

 

  (i) Notwithstanding anything to the contrary hereunder, Client and Investment Manager agree that the provisions of this Section 11 are not intended to constitute a waiver by Client of any of its legal rights under applicable federal securities laws or any other laws whose applicability is not permitted to be contractually waived.

 

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  (j) Client acknowledges that (i) Investment Manager has not provided, and will not provide, Client with any tax, legal, regulatory or accounting advice in relation to the Services under this Agreement, and (ii) Investment Manager has made no representations as to any tax or accounting consequences or regulatory filings or reporting as a result of it entering into this Agreement or any transaction entered into hereunder. Client has relied and will continue to rely on the advice of its own professional advisers and is fully informed as to the legal, financial, regulatory and tax aspects of Investment Manager’s provision of the Services hereunder.

 

12. Indemnification of Investment Manager

 

12.1 Client shall indemnify to the fullest extent permitted by applicable law, out of its assets, and hold harmless Investment Manager, each of its Affiliated Companies and each of its Associated Persons and their respective agents (each, an “Investment Manager Indemnitee”) against all claims brought or established against such Investment Manager Indemnitee by a third party, and against any and all reasonable losses, indebtedness, liabilities, fees, costs, expenses (including, without limitation, any court costs, reasonable attorneys’ fees and expenses (except that, where any matter covered by this Section 12 involves more than one Investment Manager Indemnitee, Client shall pay reasonable fees and disbursements of one counsel (in addition to any local counsel) for all Investment Manager Indemnitees in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances), reasonable costs of investigation, expert witness fees, taxes and penalties) and amounts paid in settlement (collectively, “Losses”), paid in connection with or resulting from any claim, action, proceeding or demand against any of the Investment Manager Indemnitees that arises out of or in any way relates to the Assets or the Services provided, including without limitation any such claim, action, proceeding or demand arising out of (i) a breach of Client’s representations and warranties in Section 3 or (ii) actions or omissions of the Custodian(s), Client Brokers, proxy voting services or any of Client’s affiliates (including, for the avoidance of doubt, Brighthouse Services), agents or service providers; provided, in each case that Investment Manager (a) has taken reasonable steps to avoid or minimize such Losses; (b) has informed Client of any such claims in respect of which an indemnity is sought under this Agreement as soon as reasonably practicable; and (c) keeps Client reasonably informed of, and acts reasonably in relation to any request from Client in relation to, any steps taken or to be taken in respect of such claims; provided, however, that this indemnity shall not extend to Losses (x) solely caused by or resulting from conduct of any Investment Manager Indemnitee that constitutes willful misconduct, gross negligence or bad faith in the performance of the Services hereunder or (y) for which Investment Manager shall be liable under Section 13.2(b).

 

12.2 Expenses incurred by any Investment Manager Indemnitee in defending a claim or proceeding covered by this Section 12 shall be paid by Client in advance of the final disposition of such claim or proceeding; provided, that the indemnified party hereunder shall undertake to repay such amount if it is ultimately determined that such person was not entitled to be indemnified. The provisions of this Section 12 shall remain in effect as to each person with respect to actions taken (or omitted) while such person was an Investment Manager Indemnitee, whether or not such Investment Manager Indemnitee continues to serve in the capacity that had entitled such person to be indemnified. Client agrees, upon demand by Investment Manager, to pay such amounts to Investment Manager in immediately available funds.

 

13. Standard of Care; Investment Manager’s Liabilities

 

13.1 Investment Manager shall discharge its duties hereunder at all times in good faith and with that degree of prudence, diligence, care and skill which a prudent person rendering services as an investment manager registered as an investment adviser under the Advisers Act would exercise under similar circumstances.

 

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13.2 Notwithstanding any other provision of this Agreement, none of Investment Manager or its Affiliated Companies or any of their officers, directors or employees, or their respective agents, shall be liable to Client or to any of Client’s affiliates (including, for the avoidance of doubt, Brighthouse Services) or beneficial owners for any Losses suffered by any such person that arises out of any action or omission (in relation to the Assets, the Services, this Agreement, any related document or any transaction or investment contemplated hereby or thereby) taken or suffered by them that does not result from (a) Investment Manager’s willful misconduct, gross negligence or bad faith in the performance of the Services hereunder or (b) a material breach of the Guidelines, which for the avoidance of doubt shall not include, failure to comply with any specific guideline or restriction contained therein because of market fluctuation, changes in the capital structure of any company that is an issuer of an investment included in the Assets, ratings agency or credit ratings changes or withdrawals or other events outside of Investment Manager’s control occurring after the purchase of such investment; provided, that if Investment Manager remedies any such material breach of the Guidelines within the relevant cure period specified therein, all Losses with respect to this clause (b) shall be limited to actual monetary losses incurred in connection with Investment Manager bringing the portfolio back into compliance with the Guidelines. Investment Manager and such other persons may consult with counsel and accountants in respect of the Assets or the Services and shall be fully protected and justified in any action or inaction that is taken in accordance with the advice or opinion of such counsel or accountants; provided, that they shall have been selected with reasonable care. For the avoidance of doubt, Investment Manager shall bear no liability for (i) Losses resulting from Investment Manager’s reliance on Client Data, (ii) Losses resulting from Client’s use of any Third Party Products (even where provided by Investment Manager) and (iii) Losses resulting from the performance or omissions of unaffiliated third parties such as, by way of example and not limitation, Brighthouse Services, transfer agents, sub-transfer agents, custodians, Client Brokers, proxy voting services, prime brokers, placement agents, third party marketers, asset data service providers, sub-advisers, current third party service providers, Pricing Sources, software providers, printers, postal or delivery services, telecommunications providers and processing and settlement services; provided, that any unaffiliated third party agent or delegate selected by Investment Manager shall have been selected and monitored with reasonable care. Investment Manager may rely on and shall have no duty to investigate or confirm the accuracy or adequacy of any information provided by any of the foregoing third parties. Investment Manager shall indemnify and hold Client harmless against Losses to which Client may be subjected that result from (a) any willful misconduct, gross negligence or bad faith on the part of Investment Manager in the performance of the Services hereunder or (b) a material breach of the Guidelines, which for the avoidance of doubt shall not include, failure to comply with any specific guideline or restriction contained therein because of market fluctuation, changes in the capital structure of any company that is an issuer of an investment included in the Assets, ratings agency or credit ratings changes or withdrawals or other events outside of Investment Manager’s control occurring after the purchase of such investment; provided, that if Investment Manager remedies any such material breach of the Guidelines within the relevant cure period specified therein, all Losses with respect to this clause (b) shall be limited to actual monetary losses incurred in connection with Investment Manager bringing the portfolio back into compliance with the Guidelines; provided, further, that Investment Manager’s liability arising from Securities Lending Activities shall be limited as set forth in Section 13.5 below.

 

13.3 Notwithstanding Section 13.2, Investment Manager shall not incur any liability for any indirect, special or consequential loss of any kind (even if Investment Manager knows of the possibility of such losses or damages and regardless of the type of action in which any claim may be brought).

 

13.4 Notwithstanding Section 13.2, Investment Manager shall not incur any liability for any loss of goodwill or business (in either case, either direct or indirect) that may be incurred by Client. Further, with respect to Securities Lending Activities, Investment Manager does not assume any market or investment risk of loss associated with any investment or change of investments, including any cash collateral reinvestments with respect to the reinvestment portfolio.

 

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13.5 If at the time of a default by a Borrower with respect to a securities lending transaction, some or all of the loaned securities (the “Loaned Securities”) under such securities lending transaction have not been returned by the Borrower, then, subject to the terms of this Agreement, Investment Manager shall indemnify Client against the default of the Borrower as follows:

 

  13.5.1 Investment Manager shall purchase a number of replacement securities equal to the number of unreturned Loaned Securities (the “Replacement Securities”), to the extent that such Replacement Securities are available on the open market. Such Replacement Securities shall be purchased by applying the proceeds of the collateral with respect to such securities lending transaction to the purchase of such Replacement Securities. If and to the extent that such proceeds are insufficient or the collateral is unavailable, the purchase of such Replacement Securities shall be made at Investment Manager’s expense.

 

  13.5.2 If Investment Manager is unable to purchase Replacement Securities pursuant to Section 13.5.1 hereof, Investment Manager shall credit to Client’s account an amount equal to the market value of the unreturned Loaned Securities for which Replacement Securities are not so purchased, determined as of (i) the last day the collateral continues to be successfully marked to market by the Borrower against the unreturned Loaned Securities (i.e., the last day the Borrower provided additional collateral to Investment Manager, if required, or excess collateral was returned by the Investment Manager to the Borrower); or (ii) the next business day following the day referred to in (i) above, if higher.

 

  13.5.3 In addition to making the purchases or credits required by Sections 13.5.1 and 13.5.2 hereof, Investment Manager shall credit to Client’s account the value of all distributions on the Loaned Securities (not otherwise credited to Client’s accounts with the Investment Manager), for record dates which occur before the date that Investment Manager purchases Replacement Securities pursuant to Section 13.5.1 or credits Client’s account pursuant to Section 13.5.2.

 

  13.5.4 Any credits required under Sections 13.5.2 and 13.5.3 hereof shall be made by application of the proceeds of the collateral, if any, that remains after the purchase of Replacement Securities pursuant to Section 13.5.1. If and to the extent that the collateral is unavailable or the value of the proceeds of the remaining collateral is less than the value of the sum of credits required to be made under Sections 13.5.2 and 13.5.3, such credits shall be made at Investment Manager’s expense.

 

  13.5.5 If, after application of Sections 13.5.1 through 13.5.4 hereof, additional collateral remains or any previously unavailable collateral becomes available or any additional amounts owed by the Borrower with respect to such securities lending transaction(s) are received from the Borrower, Investment Manager shall apply the proceeds of such collateral or such additional amounts first to reimburse itself for any amounts expended by Investment Manager pursuant to Sections 13.5.1 through 13.5.4 above, and then to credit to Client’s account all other amounts owed by the Borrower to Client with respect to such securities lending transaction(s).

 

  13.5.6 In the event that Investment Manager is required to make any payment and/or incur any loss or expense under this Section 13.5, Investment Manager shall to the extent of such payment, loss or expense, be subrogated to, and succeed to, all the rights of Client against the Borrower with respect to the applicable securities lending transaction(s).

 

  13.5.7 The provisions of this Section 13.5 shall not apply to losses attributable to war, riot, revolution, acts of government or other causes beyond the reasonable control or apprehension of Investment Manager. For the avoidance of doubt, the provisions of this Section 13.5 shall apply to, inter alia, losses attributable to Borrower defaults.

 

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13.6 Client acknowledges and agrees that Investment Manager alone, and not any Associated Persons, is responsible for Investment Manager’s activities and the provision of the Services, and Client agrees that it will not bring any claim or take any action against any Associated Person in respect of any acts, omissions or events in connection with this Agreement and waives any rights that it may have to do so except where such a claim may not be excluded by law. Investment Manager Indemnitees shall not have any liability to Client except as may be provided by law or in this Agreement, and Client’s sole recourse shall be to Investment Manager. Investment Manager only assumes duties to Client.

 

13.7 Investment Manager may, from time to time, provide to Client certain services and products (“Third Party Products”) from external third party sources (“Third Party Vendors”), as well certain proprietary products and information from Investment Manager and its Affiliated Companies (“Investment Manager Proprietary Products”). Client shall honor reasonable requests by Investment Manager and the Third Party Vendors to protect their proprietary rights in their data, information and property including requests that Client place copyright notices or other proprietary legends on printed matter, print outs, tapes, disks, film or any other medium of dissemination. Client further acknowledges and agrees that all Third Party Products and Investment Manager Proprietary Products are provided on an “AS IS WITH ALL FAULTS” basis solely for Client’s internal use, and as an aid in connection with the receipt of the Services. Client may use Third Party Products and Investment Manager Proprietary Products as agreed between Client and Investment Manager and may use hard copy statements, reports and other documents necessary to support Client’s activities, but Client shall not distribute any such materials to third parties. THE THIRD PARTY VENDORS AND INVESTMENT MANAGER MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, WITH RESPECT TO ANY OF THE THIRD PARTY PRODUCTS OR INVESTMENT MANAGER PROPRIETARY PRODUCTS. To the extent a Third Party Vendor provides Third Party Products directly to Client, or Investment Manager provides such Third Party Products to Client, Client shall not use such Third Party Products to access any information of any other client of Investment Manager or Investment Manager itself.

 

13.8 While Investment Manager will seek to fulfill its obligations to Client, exceptional circumstances may occur from time to time where, for reasons beyond Investment Manager’s control, Investment Manager may be, or may reasonably believe that it is, unable to do so without considerable expense (as a result of an act of God or force majeure, including environmental incidents and terrorist activity), and in such circumstances, after providing written notice to Client, Investment Manager shall not be liable for any Losses suffered as a result of the non-fulfillment of any such obligations.

 

14. Independent Contractor

 

14.1 Investment Manager shall for all purposes be deemed to be an independent contractor. Investment Manager shall have no power or authority to bind Client or to assume or create an obligation or responsibility, express or implied, on behalf of Client, nor shall it represent to anyone that it has such power or authority, except in each case as expressly provided in this Agreement. Nothing in this Agreement shall be deemed to create a partnership between the parties, whether for purposes of taxation or otherwise.

 

15. Capacity of Personnel; Facilities

 

15.1

Whenever Investment Manager or its Affiliated Companies utilize their respective personnel to perform the Services, such personnel shall at all times remain employees of Investment Manager or its Affiliated Companies, respectively, subject solely to their direction and control, including through a services agreement with any such Affiliated Company, and Investment Manager or such

 

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  Affiliated Company under such services agreement shall alone retain full liability, and Client shall have no such liability to such personnel for their welfare, salaries, fringe benefits, legally required employer contributions and tax obligations. Investment Manager alone (and not Client) shall be responsible for payment of all fees and expenses owed to its Affiliated Companies under any such services agreements. No facility of Investment Manager or an Affiliated Company used in performing Services for Client shall be deemed to be transferred, assigned, conveyed, or leased to Client by performance or use pursuant to this Agreement.

 

16. Term and Termination of Agreement

 

16.1 Either party may terminate this Agreement in its entirety on, or at any time after, the expiration of the Initial Term upon 90 days prior written notice to the other party (or such mutually agreeable shorter period). Notwithstanding the foregoing, this entire Agreement will immediately terminate, including during the Initial Term, upon written notice being given by Client to Investment Manager in the event of: (i) Investment Manager’s willful misconduct, gross negligence or bad faith in performing the Services hereunder; provided, that Investment Manager shall have 60 days after receipt of written notice detailing such alleged willful misconduct, gross negligence or bad faith to cure such matter to Client’s reasonable satisfaction or to agree with Client to a plan to remediate such matter before Client shall be permitted to deliver a termination notice to Investment Manager, (ii) liquidation, conservatorship or receivership of Investment Manager, (iii) an order, judgment or decree of any court of competent jurisdiction or the SEC enjoining Investment Manager from acting as an investment adviser for a period of 90 days or more or (iv) Client’s receipt of a definitive ruling from a state insurance regulatory authority that such termination is required to comply with insurance laws and regulations applicable to Client; provided, that Investment Manager shall have 60 days after receipt of such definitive ruling to (x) agree with Client to modify this Agreement or the provision of Services hereunder to the least extent necessary to enable Client to comply with such ruling or (y) contest or obtain a modification or reversal of such ruling, in either case before Client shall be permitted to deliver a termination notice to Investment Manager.

 

16.2 Further, either party may terminate this Agreement in part with respect to (x) the Investment Management Services with respect to all or any portion of the Assets or (y) any or all of the Portfolio Management Services, on, or at any time and from time to time after, the expiration of the Initial Term upon 90 days prior written notice to the other party (or such mutually agreeable shorter period). In the event either party elects to terminate the provision of Investment Management Services with respect to any Assets or any of the Portfolio Management Services, (i) such termination will not cause a termination of the entire Agreement, (ii) Investment Manager shall cooperate in good faith and promptly take all actions reasonably necessary or desirable to transfer all impacted Assets and all documents and records regarding or relating to any terminated Services (including, if applicable, any derivative instruments) to Client or to Client’s designee(s) in such format as may be reasonably requested by Client and shall reasonably cooperate with Client and any Client designee(s) to facilitate the transition of the impacted Assets or Portfolio Management Services to a successor service provider and (iii) the Management Fee shall be adjusted accordingly; provided, however, that the Management Fee for Hedging Activities shall remain the same in the event either one of GA Derivatives Activities or VA Derivatives Activities is terminated and shall only be adjusted in the event Investment Manager is no longer providing any Hedging Activities under this Agreement.

 

16.3 Notwithstanding the foregoing, in the event Client terminates the Investment Management Services with respect to any Assets or any of the Portfolio Management Services pursuant to Section 16.2 hereof, Investment Manager shall no longer provide the Middle Office Services or reports listed on Schedule 5 to Client in respect of any impacted Assets; provided, however, that in the event Client terminates the Investment Management Services with respect to commercial real estate mortgage debt or agricultural mortgage debt, Investment Manager shall continue to provide those reports listed on Schedule 5 (or portions thereof) pertaining to Client’s outstanding loan participations until the earlier of the date on which (x) the entire indebtedness represented by all of the loans underlying the Client’s outstanding loan participations has been paid and/or the disposition of all properties/assets acquired upon foreclosure and (y) Client no longer holds any Affiliated Company loan participations.

 

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16.4 For purposes of this Section, the “Termination Date” shall mean the date that Investment Manager is no longer providing any Services under this Agreement, and shall not mean the date on which the notice of termination is delivered. The termination of the authority granted by this Agreement shall not in any way affect any liability resulting from a transaction initiated prior to the Termination Date. On the Termination Date, Investment Manager shall promptly take commercially reasonable steps to transfer all remaining Assets and all documents and records regarding or relating to such Assets or the Services (including, without limitation, derivative instruments) to Client or to Client’s designee(s) in such format as may be reasonably requested by Client and shall reasonably cooperate with Client and any Client designee(s) to facilitate the transition of such Assets or Services to a successor service provider. This provision as well as Sections 3.1(b) (Client Authority), 4.1(b) (Investment Manager Authority), 8 (Material Impacts and Conflicts), 10.2 (Expenses), 12 (Indemnification of Investment Manager), 13 (Standard of Care; Investment Manager’s Liabilities), 16 (Term and Termination of Agreement), 17 (Governing Law), 19 (Entire Agreement), 20 (Notices), 21 (No Waiver), 22 (Successors and Assigns) and 23 (Counterparts) shall survive the Termination Date.

 

16.5 On the Termination Date, Client will pay and/or reimburse Investment Manager for any: (a) accrued and unpaid Management Fees prorated to the Termination Date, (b) reasonable expenses incurred by Investment Manager in transferring all documents and records regarding or relating to the Assets or Services to Client or Client’s designee(s) in such format as may be reasonably requested by Client and reasonably cooperating with Client and any Client designee(s) to facilitate the transition of Assets and Services to a successor service provider, (c) accrued and unpaid Expenses (if any) and (d) reasonable fees, including but not limited to breakage or termination fees, realized in concluding any outstanding transactions.

 

16.6 Termination of this Agreement or any portion thereof will not in any event affect accrued rights or existing commitments, or contractual provisions intended to survive termination including outstanding transactions. For the avoidance of doubt, the termination of this Agreement in whole or in part will not cause the termination and closeout of (a) any derivative transactions previously entered into for Client unless otherwise determined by Client, (b) any funding or collateral borrowing arrangements relating to Capital Markets Activities and Client shall remain obligated to pay the Management Fee with respect to all of Client’s outstanding arrangements until their maturity or (c) any outstanding loan participations and Client shall remain obligated to pay the Management Fee with respect to all of Client’s outstanding loan participations until the earlier of the date on which (x) the entire indebtedness represented by all of the loans underlying Client’s outstanding loan participations has been paid and/or the disposition of all properties acquired upon foreclosure and (y) Client no longer holds any Affiliated Company loan participations.

 

17. Governing Law; Severability; Dispute Resolution; Submission to Jurisdiction

 

17.1 This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or another jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York; provided, however, that nothing contained in this Agreement shall be construed in any manner as inconsistent with federal law, including without limitation the Advisers Act or any rule, regulation or order of the SEC promulgated thereunder.

 

17.2 If any provision or clause of this Agreement is or becomes void, illegal or unenforceable in whole or in part for any reason whatsoever, such unenforceability, illegality or invalidity shall not affect the enforceability or validity of the remaining provisions or clauses or part thereof contained in this Agreement and such void or unenforceable provisions or clauses shall be deemed to be severable from any other provision or clause or part thereof herein contained. The invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in another jurisdiction.

 

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17.3 In the event Client is placed into receivership or seized by the Commissioner under Chapter 59 of the Delaware Insurance Code (“Chapter 59”), all parties hereto shall use reasonable efforts to comply with Chapter 59. Without limiting the foregoing, in the event Client is placed into receivership or seized by the Commissioner, (i) Investment Manager shall have no automatic right to terminate this Agreement, (ii) all rights of Client under this Agreement shall extend to the receiver or the Commissioner, (iii) all books and records of Client relating to the Services hereunder shall be made available to the receiver or the Commissioner, and shall be turned over to the receiver or the Commissioner immediately upon the receiver’s or the Commissioner’s request and (iv) Investment Manager shall continue to maintain any systems, programs or other infrastructure relating to the Services hereunder notwithstanding the seizure of Client by the Commissioner and shall make them available to the receiver or the Commissioner for so long as Investment Manager continues to receive timely payment for the Services performed hereunder.

 

17.4 Notwithstanding anything to the contrary herein, any dispute, controversy or claim arising out of or relating to this Agreement or the validity, interpretation, breach or termination thereof shall be resolved by mediation or arbitration following the dispute resolution procedures set forth in Article VI of the Master Separation Agreement between MetLife, Inc. and Brighthouse Financial, Inc., which shall be the sole and exclusive procedures for the resolution of any such dispute, controversy or claim unless otherwise specified in Sections 6.1 to 6.4 of such agreement. For purposes of applying those procedures, this Agreement shall be considered a “Transaction Document,” the parties hereto shall be considered “Parties” and Section 6.1(f) shall not apply.

 

17.5 Subject to Section 17.4, if any suit is instituted by either party against the other party to enforce any of the terms or conditions of this Agreement, each party hereby agrees to submit to the exclusive jurisdiction of and venue in the federal courts of the United States of America, County of New York, State of New York, to the extent permitted by federal law, and otherwise, each of the parties hereby submits to the exclusive jurisdiction of and venue in the state courts of the State of New York located in the city and county of New York.

 

17.6 Waiver of Jury Trial Right. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this paragraph.

 

18. Amendments

 

18.1 Subject to Section 2.2, no amendment of this Agreement shall be effective unless agreed in writing by each of the parties hereto.

 

19. Entire Agreement

 

19.1 The relationship between Client and Investment Manager is as described in this Agreement and the Investment Finance Services Agreement between Client and Investment Manager effective as of January 1, 2017. Except with respect to the representations and warranties made by Investment Manager therein, Client is not relying upon any representation, warranty, promise or assurance made or given by Investment Manager or any other person, whether or not in writing, at any time prior to Investment Manager’s appointment pursuant to this Agreement. This Section 19 shall not exclude the liability of any persons for fraud or fraudulent misrepresentation.

 

20. Notices

 

20.1 Any notice served by any party hereto to another party hereto shall be served at the address of the recipient as set forth in Schedule 4, which can be changed by a party upon notice in writing to the other party.

 

20.2 All notices served hereunder shall be deemed served on the date of delivery in the case of personal delivery or transmission by e-mail and on the third day after posting in the case of other correspondence sent by post.

 

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21. No Waiver

 

21.1 Neither the failure nor delay on the part of any party in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy preclude any other or further waiver of any right or remedy. No waiver hereunder shall be effective unless it is authorized by the party asserted to have granted such waiver.

 

22. Successors and Assigns

 

22.1 No assignment (as that term is defined in the Advisers Act) of this Agreement as it relates to Investment Manager and Client may be made by either party without the prior written consent of the other party hereto; provided, however, that an assignment by Investment Manager to an Affiliated Company (that does not constitute an assignment for purposes of Section 205(a)(2) of the Advisers Act) shall require only prior written notice to Client and not require such prior written consent if such Affiliated Company is registered with the SEC as an investment adviser pursuant to the Advisers Act, and assumes, for the express benefit of Client, all of the obligations of Investment Manager hereunder in writing at the time of such assignment. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto, and each of their respective successors and permitted assigns. Except as and to the extent specifically provided in this Agreement, nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto, or their respective legal successors, any rights, remedies, obligations, or liabilities, or to relieve any person other than the parties hereto, or their respective legal successors, from any obligations or liabilities that would otherwise be applicable. A person who is not a party to this Agreement shall have no rights to enforce any provision of this Agreement. The representations, warranties, covenants, and agreements contained in this Agreement shall be binding upon, extend to and inure to the benefit of the parties hereto, their, and each of their, successors and assigns, respectively.

 

23. Counterparts

 

23.1 This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or electronic mail in portable document format shall be effective as delivery of a manually executed counterpart of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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Each of the parties hereto has caused this Agreement to be duly executed as of the date indicated after its name to become effective as of the Effective Date.

AGREED TO AND ACCEPTED:

METLIFE INVESTMENT ADVISORS, LLC

 

By:  

 

Name:  

 

Title:  

 

Date:  

 

METLIFE INSURANCE COMPANY USA

 

By:  

 

Name:  

 

Title:  

 

Date:  

 

[Signature Page to Investment Management Agreement Between

MetLife Investment Advisors, LLC and MetLife Insurance Company USA]


SCHEDULE 1

TO

INVESTMENT MANAGEMENT AGREEMENT

LIST OF AUTHORIZED PERSONS


SCHEDULE 2

TO

INVESTMENT MANAGEMENT AGREEMENT

LEGAL ENTITY INVESTMENT GUIDELINES

 

 

 


SCHEDULE 3

TO

INVESTMENT MANAGEMENT AGREEMENT

SCHEDULE OF FEES

 

 

 


SCHEDULE 4

TO

INVESTMENT MANAGEMENT AGREEMENT

ADDRESSES FOR NOTICES

 

 

 


SCHEDULE 5

TO

INVESTMENT MANAGEMENT AGREEMENT

REPORTS

 

 

 


SCHEDULE 6

TO

INVESTMENT MANAGEMENT AGREEMENT

DISCLOSURE AND CONSENT REGARDING ELECTRONIC DELIVERY

 

 

 


SCHEDULE 7

TO

INVESTMENT MANAGEMENT AGREEMENT

MIDDLE OFFICE SERVICES

 

 

 

EX-10.4

Exhibit 10.4

FORM OF INTELLECTUAL PROPERTY LICENSE AGREEMENT

THIS INTELLECTUAL PROPERTY LICENSE AGREEMENT (this “Agreement”), dated as of [            ], 2017 (the “Effective Date”), by and among Metropolitan Life Insurance Company, a New York-domiciled insurance company (“MetLife”), on behalf of itself and its Affiliates other than the Brighthouse Company Group, and Brighthouse Services LLC, a Delaware limited liability company, (“Brighthouse”) on behalf of itself and the other members of the Brighthouse Company Group. MetLife and Brighthouse are hereinafter referred to collectively as the “Parties” or individually as a “Party”.

RECITALS

WHEREAS, the board of directors of MetLife, Inc., the corporate parent of the Parties, has approved the separation of Brighthouse Financial, Inc. and each other member of the Brighthouse Company Group, including Brighthouse, into a separate business, whereby MetLife, Inc. will cease to own a majority of the issued and outstanding equity interests of Brighthouse Financial, Inc. or any other member of the Brighthouse Company Group (the “Separation” and such date and time of the Separation, the “Separation Date”);

WHEREAS, in connection with the Separation, MetLife, Inc. and Brighthouse Financial, Inc. will enter into that certain Master Separation Agreement (the “Master Separation Agreement”);

WHEREAS, the Master Separation Agreement will provide for the transfer of ownership of certain intellectual property from MetLife and its Affiliates to the Brighthouse Companies (the “Transferred IP”);

WHEREAS, in connection with the Separation, each of MetLife and Brighthouse desires to license to the other Party the rights to use certain of such Party’s Intellectual Property in connection with the operation of their businesses as of the Effective Date and as of the Separation Date.

NOW, THEREFORE, in consideration of the mutual covenants, agreements and promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1    Defined Terms. For purposes of this Agreement, unless the context requires otherwise, the following terms shall have the meanings hereinafter specified:

Action” means any demand, action, claim, dispute, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any arbitration or mediation tribunal.


Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with such first Person.

Agreement” has the meaning set forth in the Preamble, and includes all amendments thereto and all schedules and exhibits thereof.

Arbitration Panel” has the meaning set forth in Section 11.4(b).

Arbitration Procedure” has the meaning set forth in Section 11.4(d).

Arbitration Rules” has the meaning set forth in Section 11.4(a).

Brighthouse” has the meaning set forth in the Preamble.

Brighthouse Company Group” means Brighthouse Financial, Inc. and any Affiliate thereof on or after the Separation Date, including the companies set forth on Exhibit 1 hereto.

Brighthouse Other IP” has the meaning set forth in Section 5.5.

Business” means the business of the members of the Brighthouse Company Group.

Cessation Date” has the meaning set forth in Section 8.3(b).

Control” (including its correlative meanings “Controlled by” and “under common Control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

Confidential Information” has the meaning set forth in Section 7.2.

CPR” has the meaning set forth in Section 11.3.

Determination” has the meaning set forth in Section 11.4(d).

Discloser” has the meaning set forth in Section 7.2.

Dispute” has the meaning set forth in Section 11.1.

Effective Date” has the meaning set forth in the Preamble.

Force Majeure” means, with respect to a Party, an event beyond the control of such Party (or any Person acting on its behalf), which by its nature could not have been foreseen by such Party (or such Person), or, if it could have been foreseen, was unavoidable, and includes, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism or failure of energy sources.

 

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Governmental Authority” means any federal, state or local domestic, foreign or supranational governmental, regulatory or self-regulatory authority, agency, court, tribunal, commission or other governmental, regulatory or self-regulatory entity.

Initial Notice” has the meaning set forth in Section 11.2.

Intellectual Property” means all of the following, whether protected, created or arising under the laws of the United States or any other foreign jurisdiction, including: (i) patents, patent applications (along with all patents issuing thereon), statutory invention registrations, divisions, continuations, continuations-in-part, substitute applications of the foregoing and any extensions, reissues, restorations and reexaminations thereof, and all rights therein provided by international treaties or conventions; (ii) trademarks, service marks, trademark and service mark applications and registrations, trade names, service names, taglines, slogans, industrial designs, brand names, brand marks, trade dress, identifying symbols, logos, emblems, signs or insignia, monograms, domain names, domain name locators, meta tags, website search terms and key words, and other identifiers of source, including all goodwill associated therewith, and any and all common law rights, and registrations and applications for registration thereof, all rights therein provided by international treaties or conventions, and all reissues, extensions and renewals of any of the foregoing; (iii) copyrights and copyrightable works, mask work rights, database rights and design rights, whether or not registered, published or unpublished, and registrations and applications for registration thereof and all rights therein whether provided by international treaties or conventions or otherwise; (iv) trade secrets, know-how, and other confidential and proprietary information including confidential or proprietary data contained in databases, and confidential or proprietary customer lists; (v)) all other applications and registrations related to any of the intellectual property rights set forth in the foregoing clauses (i) – (iv) above.

Investment Management Agreement” means the Investment Management Agreement, and, if applicable, additional agreements for investment management, between MetLife, Inc. and Brighthouse Financial, Inc. included in the Transaction Documents.

Law” means all applicable laws, rules, regulations and ordinances, and all binding orders of any court, agency or other Governmental Authority.

Licensed Brighthouse Marks” has the meaning set forth in Section 2.2.

Licensed Marks” means the Licensed MetLife Marks and/or the Licensed Brighthouse Marks, as applicable.

Licensed MetLife Marks” has the meaning set forth in Section 2.1.

Limited License Use” means (i) non-public distribution, dissemination or disclosure restricted to employees of a licensee Party, its Affiliates, or their respective third party vendors under written obligations of confidentiality at least as stringent as those required under this Agreement and/or (ii) public distribution, dissemination or disclosure of such materials only to the extent such materials were publicly distributed, disseminated or disclosed prior to the Separation Date.

 

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Losses” mean all costs, damages, disbursements, obligations, penalties, liabilities, assessments, judgments, losses, injunctions, orders, decrees, rulings, dues, fines, fees, settlements, deficiencies or awards (including interest, penalty, investigation, reasonable legal, accounting and other professional fees, and other costs or expenses incurred in the investigation, collection, prosecution and defense of any action, suit, proceeding or claim and amounts paid in settlement) imposed upon or incurred, sustained or suffered by a Party that is indemnified under Article IX; provided, however, that Losses shall include only actual losses, and shall not include (i) taxes or (ii) lost profits or opportunity costs or consequential, incidental, special, indirect, exemplary or punitive damages, unless such consequential, incidental, special, indirect, exemplary or punitive damages are awarded against any Party indemnified under Article IX with respect to a third-party claim.

Master Separation Agreement” has the meaning set forth in the Recitals.

Mediation Notice” has the meaning set forth in Section 11.3.

MetLife” has the meaning set forth in the Preamble.

MetLife Actuarial Practice Standards” has the meaning set forth in Section 5.3.

MetLife Marks” means all trademark, service mark, trade name, business name, internet domain name or internet domain name locator, or any goodwill related thereto, belonging to or owned by MetLife or its Affiliates.

MetLife Other IP” means Intellectual Property belonging to or owned by MetLife or its Affiliates other than the Brighthouse Company Group, except for the MetLife Marks.

Offer” has the meaning set forth in Section 11.4(d).

Party” or “Parties” has the meaning set forth in the Preamble.

Person” means any individual, corporation, business trust, partnership, association, limited liability company, unincorporated organization or similar organization, or any Governmental Authority.

Preamble” means the first paragraph of this Agreement.

Recipient” has the meaning set forth in Section 7.2.

Response” has the meaning set forth in Section 11.2.

Separation” has the meaning set forth in the Recitals.

Separation Date” has the meaning set forth in the Recitals.

Software” means the object and source code versions of computer programs and associated documentation, training materials and configurations to use and modify such programs, including programmer, administrator, end user and other documentation.

 

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Term” has the meaning set forth in Section 8.1(a).

Territory” means the United States of America.

Transaction Documents” means any of the agreements set forth on Exhibit 2 of this Agreement.

Transition Services Agreement” means the Transition Services Agreement entered into as of January 1, 2017 by and between MetLife Services and Solutions, LLC and Brighthouse and for purposes of Article VIII thereof only, MetLife, Inc. and Brighthouse Financial, Inc.

Transitional Period” has the meaning set forth in Section 8.3(b).

Transferred IP” has the meaning set forth in the Recitals.

ARTICLE II

TRADEMARK LICENSES

Section 2.1    Scope of License to Brighthouse. During the Term and subject to the terms and conditions of this Agreement, MetLife hereby grants to Brighthouse and its Affiliates a non-exclusive, non-transferable (except as set forth in Section 12.8), non-sublicenseable (except as set forth in Section 2.5(a)), paid-up and royalty-free license to use the service marks and trademarks identified in Schedule A (the “Licensed MetLife Marks”) solely in connection with the Business in the Territory and subject to any limitations set forth on Schedule A.

Section 2.2    Scope of License to MetLife. During the Term and subject to the terms and conditions of this Agreement, Brighthouse hereby grants to MetLife and its Affiliates a non-exclusive, non-transferable (except as set forth in Section 12.8), non-sublicenseable (except as set forth in Section 2.5(b)), paid-up and royalty-free license to use the service marks and trademarks identified in Schedule B (the “Licensed Brighthouse Marks”) solely in connection with providing services to and on behalf of Brighthouse and its Affiliates in the Territory pursuant to any of the Transaction Documents and subject to any limitations set forth on Schedule B. Upon execution of the Master Separation Agreement, the trademarks and service marks set forth on Schedule 2.2(a)(v)(A) thereto shall be deemed added to Schedule B hereof, subject to any limitations that Brighthouse provides MetLife in writing.

Section 2.3    Third Party Intellectual Property. Any license granted hereunder to Licensed Marks (or portions thereof) owned by third parties that are not Affiliates of MetLife or Brighthouse, and that are licensed by such third parties to MetLife or Brighthouse, as applicable, will be subject to the terms and conditions of any written agreements between MetLife (and its Affiliates) or Brighthouse (and its Affiliates), as applicable, and such third parties, which agreements were in effect as of the Effective Date. Nothing in this Agreement will obligate either MetLife (or its Affiliates) or Brighthouse (or its Affiliates), as applicable, to breach any such agreement with a third party that is not an Affiliate of that entity or Party. For the avoidance of doubt, no license or right of any kind is granted in this Agreement in or to the “Snoopy” and other “Peanuts” comic strip characters and marks.

 

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Section 2.4    Appearance of the Licensed Marks. Each licensee of the Licensed Marks pursuant to Section 2.1 or Section 2.2 may (i) only use such Licensed Marks in the same appearance in use as of the Effective Date and (ii) not modify such Licensed Marks through combination with any other logo, design, symbol, trademark, service mark, company or corporate name or commercial slogan or with any prefix or suffix or any modifying word or term hereunder (provided use of a Licensed Mark in proximity to another mark may be permissible to the extent that such use is not likely to give the impression that the Licensed Mark and the additional mark are a unitary mark), except as agreed to in this Agreement or otherwise agreed to in writing by the Parties prior to such use.

Section 2.5    Sublicensing.

(a)    Brighthouse and its Affiliates may sublicense their rights hereunder in the Licensed MetLife Marks solely to market, sell, distribute and service products and services in connection with the Business. Brighthouse shall ensure that all of its and its Affiliates’ sublicensees of such rights comply with all terms and conditions of this Agreement applicable to Brighthouse, and Brighthouse shall cooperate with MetLife in connection therewith.

(b)    MetLife and its Affiliates may sublicense their rights hereunder in the Licensed Brighthouse Marks solely in connection with providing services to Brighthouse pursuant to the Transaction Documents. MetLife shall ensure that its and its Affiliates’ sublicensees of such rights comply with all terms and conditions of this Agreement applicable to MetLife, and MetLife shall cooperate with Brighthouse in connection therewith.

Section 2.6    Omitted Licensed Marks. Prior to one year after the Separation Date, if either Party discovers any mark that was used in the Business prior to the Effective Date but was omitted unintentionally from Schedule A or Schedule B, and is not licensed to Brighthouse under the Transaction Documents, it shall promptly notify the other Party and, to the extent agreed upon by both Parties, the Parties shall promptly amend this Agreement to add such Mark to Schedule A.

ARTICLE III

TRADEMARK OWNERSHIP

Section 3.1    Acknowledgments and Notices.

(a)    Each of Brighthouse (with respect to the Licensed MetLife Marks) and MetLife (with respect to the Licensed Brighthouse Marks): (i) acknowledges that, as between the Parties, the other Party (or its Affiliates) is the owner of such Licensed Marks, (ii) covenants not to challenge the other Party’s or its Affiliate’s ownership of such Licensed Marks or their validity or enforceability, and (iii) agrees that the goodwill arising from its use of such other Party’s Licensed Marks hereunder shall inure to the benefit of the other Party.

(b)    Brighthouse shall use reasonable efforts to include trademark notices or other appropriate disclosures concerning the licensing relationship between the Parties in connection with the Licensed MetLife Marks. Without limiting the generality of the foregoing, Brighthouse shall use a notice similar to the following written notice, except to the extent that such notice would not fit due to size restrictions (e.g., in a banner advertisement), in connection with its use and sublicense of the Licensed MetLife Marks (or such other written ownership notice as reasonably requested by MetLife from time to time): “[insert Licensed Marks] are service marks of [Metropolitan Life Insurance Company or its Affiliates] and are used under license to [Brighthouse entity].”

 

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(c)    MetLife shall use reasonable efforts to include trademark notices or other appropriate disclosures concerning the licensing relationship between the Parties in connection with the Licensed Brighthouse Marks. Without limiting the generality of the foregoing and other than solely in connection with services MetLife is performing for or on behalf of Brighthouse where the services or the output of the services do not contain any MetLife Marks, MetLife shall include a notice similar to the following written notice, except to the extent that such notice would not fit due to size restrictions (e.g., in a banner advertisement), in connection with its use and sublicense of the Licensed Brighthouse Marks (or such other written ownership notice as reasonably requested by Brighthouse from time to time): “[insert Licensed Marks] are service marks of [Brighthouse Financial, Inc. or its Affiliates] and used under license to [MetLife entity].”

Section 3.2    Avoidance of Adverse Actions. Brighthouse (with respect to the Licensed MetLife Marks) and MetLife (with respect to the Licensed Brighthouse Marks), shall not: (i) use such Licensed Marks, or conduct its business in connection with such Licensed Marks, in a manner that would reasonably be expected to impair the validity, value, or goodwill associated with such Licensed Marks; (ii) apply for the registration or renewal of registration of the other Party’s Licensed Marks (including as a trademark, service mark, Internet domain name, or copyright), or any confusingly similar variation thereof, without the prior written consent of the other Party; or (iii) except as permitted by Section 2.5, sublicense any such Licensed Marks.

Section 3.3    No Objection to Use of Certain Portions of MetLife Principal Marks or Product Names and/or Portions of Third Party Marks or Product Names. MetLife and its Affiliates will not directly or indirectly object or directly assist any other party in objecting to use by Brighthouse or its Affiliates or permitted sublicensees of the product names, trademarks or service marks (or portions of any of the foregoing) listed in Schedule C. Brighthouse acknowledges and agrees that (1) MetLife and its Affiliates make no representation or warranty of good title with respect to such product names or marks, and (2) MetLife and its Affiliates are in no way precluded from current or future use, or acquiring rights or registration of such names or marks (or similar names or marks). For avoidance of doubt, the covenant of MetLife and its Affiliates not to object set forth in the first sentence of this Section 3.3 does not (a) extend to any use by Brighthouse or its Affiliates of any mark or product names uses that include any MET, MetLife or Metropolitan prefix or suffix, or (b) preclude MetLife or its Affiliates from objecting to uses by third parties (other than Brighthouse’s or its Affiliates’ permitted sublicensees) of any marks or product names listed in Schedule C.

ARTICLE IV

MAINTENANCE OF QUALITY CONTROL FOR TRADEMARK LICENSES

Section 4.1    Goodwill. Brighthouse (with respect to the Licensed MetLife Marks), and MetLife (with respect to the Licensed Brighthouse Marks) shall not take any action hereunder that is likely to disparage or diminish the value or goodwill associated with such Licensed Marks.

 

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Section 4.2    Quality of Products and Services. Each of Brighthouse (with respect to the Licensed MetLife Marks), and MetLife (with respect to the Licensed Brighthouse Marks) covenants that the quality of products and services provided by such Party under such Licensed Marks will be at least equal to the quality of products and services provided under such Licensed Marks by MetLife (with respect to the Licensed MetLife Marks) and by Brighthouse (with respect to the Licensed Brighthouse Marks) in each case prior to and as of the Separation Date. With respect to Licensed MetLife Marks, as of the Effective Date, all the products and services provided under Licensed MetLife Marks are deemed to meet MetLife’s quality control standards of products and services as provided by MetLife prior to the Separation Date. With respect to Licensed Brighthouse Marks, as of the Effective Date, all the products and services provided under Licensed Brighthouse Marks are deemed to meet Brighthouse’s quality control standards. On the Separation Date, all of the products and services provided under the Licensed Marks will be deemed to meet the respective licensor’s quality controls and standards if equal to at least the quality of products and services as provided by the licensor Party prior to the Separation Date. Each Party shall have the right to periodically and reasonably request samples of materials solely as it relates to the other Party’s use of the Licensed Marks. Brighthouse (with respect to the Licensed MetLife Marks) and MetLife (with respect to the Licensed Brighthouse Marks) shall submit to the other Party any new materials using such Licensed Marks that are not substantially similar to any material existing prior to the Separation Date or to previously-approved material for prior review and written approval, such approval not to be unreasonably withheld. Failure to approve or disapprove of any such new materials within fifteen (15) Business Days following written notice thereof pursuant to Section 12.5 shall be deemed to constitute approval. With respect to use by a licensee Party of a Licensed Mark, if the licensor Party at any time requests in writing and with a reasonable basis (such as receipt of a third party claim) that the licensee Party cease or modify a use of a licensor Party’s Licensed Mark that has otherwise been approved or is permitted hereunder, the licensee shall modify in accordance with the licensor Party’s directions or, if applicable, phase out such use by exhausting its inventory of materials (and modifying electronic materials) in the ordinary course of business or sooner, if the licensor agrees to reimburse the licensee for the costs of replacing (and modifying) such materials. Each Party shall promptly notify the licensor Party of any written complaints received from third parties regarding the products or services under the other licensor Party’s Licensed Marks, or the use of the other Party’s Licensed Marks, and at the request of the licensor Party shall reasonably cooperate with the licensor Party in addressing the circumstances giving rise to such complaints. Neither licensee Party shall be deemed to be in breach of this Agreement in connection with the use of materials to the extent that (A) Brighthouse and its Affiliates create such materials bearing the Licensed Brighthouse Marks, or (B) MetLife or its Affiliates create such materials bearing the Licensed MetLife Marks, which materials in either case do not meet the requirements of this Agreement; provided that such materials are not created at the specific direction of the licensee Party or its Affiliates.

 

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ARTICLE V

OTHER INTELLECTUAL PROPERTY LICENSES

Section 5.1    License to MetLife Other IP. With the exception of all MetLife Marks and the materials listed on Schedules D-1, D-2, D-3 and D-4, during the Term and subject to the terms and conditions of this Agreement, MetLife hereby grants to Brighthouse and its Affiliates a non-exclusive, non-transferable (except in accordance with Section 12.8), sublicenseable (to the extent the sublicensee makes only a Limited License Use), paid-up and royalty-free, perpetual (unless terminated pursuant to Section 8.2) license in the Territory only to make Limited License Use of any and all MetLife Other IP that was used by a Brighthouse Company Group member prior to the Effective Date in connection with the Business; provided that (a) any Intellectual Property created pursuant to the Transition Service Agreement and any licenses thereto shall be governed by the Transition Service Agreement; (b) any derivative works created by Brighthouse (or its Affiliates or vendors) based on the MetLife Other IP may also only be used in connection with the same Limited License Use as the corresponding original MetLife Other IP; and (c) the license set forth in this Section 5.1 with respect to any MetLife Other IP shall terminate upon such MetLife Other IP becoming an Asset of any Brighthouse Company Group member pursuant to the Master Separation Agreement. For avoidance of doubt, the following are not included in the foregoing license: (1) Intellectual Property owned by any third parties (but licensed to MetLife), 2) Intellectual Property not used by a Brighthouse Company Group member immediately prior to the Effective Date, even if listed on Schedule D-3, (3) any derivative works created after the Effective Date by MetLife (or its Affiliates or vendors) based on MetLife Other IP; and (4) with respect to Software, access to any MetLife systems hosted by or on behalf of MetLife or its Affiliates, except as may be set forth in a Transaction Document. However, in the sole discretion of MetLife, upon request from Brighthouse or its Affiliates, limited content from the Intellectual Property listed on Schedule D-3 may be provided for Limited License Use in connection with the Business in accordance with Section 5.2. In no event shall Brighthouse have any rights in the MetLife Other IP set forth on Schedules D-1 and D-2 unless explicitly set forth in a writing between the Parties.

Section 5.2    Requesting Access to Excluded MetLife Intellectual Property. For up to one (1) year following termination of the Transition Services Agreement, Brighthouse may request that MetLife provide to Brighthouse, in MetLife’s sole discretion, limited access to certain MetLife Other IP not otherwise licensed to Brighthouse pursuant to Section 5.1 (but excluding any MetLife Other IP on Schedule D-2) subject to terms and conditions imposed by MetLife in writing. In order to make such a request, Brighthouse or its Affiliate shall submit a “Request for Information” to Heidi Constantine Nelson (hconstantine@metlife.com) describing the requested MetLife Other IP, including the type, location and the MetLife or its Affiliate’s business unit using such Intellectual Property, and documenting Brighthouse’s (or its Affiliate’s) business justification or need to use such Intellectual Property. To the extent that such access is provided or certain information is provided to Brighthouse by MetLife pursuant to such a request, during the Term and subject to the terms and conditions of this Agreement, MetLife and its Affiliates hereby grant to Brighthouse and its Affiliates a non-exclusive, non-transferable, sublicenseable (for Limited License Use), paid-up and royalty-free license to only make Limited License Use of such MetLife Other IP (but specifically excluding use of any MetLife Marks not licensed in Section 2.1) in connection with the Business, subject to any additional limitations made by MetLife in writing upon transmission of such materials.

 

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Section 5.3    License to Use MAPS and Certain Other Actuarial IP. For a period of five (5) years after the Effective Date, and subject to the terms and conditions of this Agreement, MetLife hereby grants to Brighthouse Company Group a non-exclusive, non-transferable (except in accordance with Section 12.8), non-sublicenseable (except as would constitute Limited License Use) paid-up and royalty-free license only to make Limited License Use of MetLife actuarial practice standards (“MetLife Actuarial Practice Standards”) and certain other actuarial materials listed in Schedule D-4 in the Territory in connection with the Business.

Section 5.4    Requesting Delivery of MetLife Other IP. For up to one (1) year following termination of the Transition Services Agreement, Brighthouse may request that MetLife deliver to Brighthouse MetLife Other IP that is the subject of a license hereunder to the extent that such MetLife Other IP is not in the possession of any Brighthouse Company Group member or such MetLife Other IP has not been previously delivered to a Brighthouse Company Group member. In order to make such a request, Brighthouse or its Affiliate shall submit a “Request for Information” to Heidi Constantine Nelson (hconstantine@metlife.com) describing the requested MetLife Other IP, including the type, location and the MetLife or its Affiliate’s business unit using such Intellectual Property (if known), and documenting Brighthouse’s (or its Affiliate’s) use of such MetLife Other IP prior to the Effective Date. To the extent Brighthouse or its Affiliates establish such use prior to the Effective Date, MetLife shall promptly deliver such MetLife Other IP to Brighthouse and the costs of delivery (including any extraction and duplication) shall be borne equally by the Parties to the extent that the cost of such delivery is not addressed in another Transaction Document.

Section 5.5    Rights to Use Brighthouse Other IP. During the Term and subject to the terms and conditions of this Agreement, Brighthouse and its Affiliates hereby grant to MetLife and its Affiliates a non-exclusive, non-transferable (except in accordance with Section 12.8), sublicenseable (to the extent the sublicensee makes only a Limited License Use) paid-up and royalty-free, perpetual (unless terminated pursuant to Section 8.2) license in the Territory to use any and all Intellectual Property owned, transferred to or used by Brighthouse or its Affiliates, pursuant to the Transaction Agreements, other than the Licensed Brighthouse Marks (“Brighthouse Other IP”), that was used by MetLife (or its non-Brighthouse Affiliates) prior to the Effective Date, provided that, (a) any derivative works based on Brighthouse Other IP created by MetLife (or its Affiliates or vendors) after the Separation Date may only be used in connection with the same Limited License Use as the corresponding, original Brighthouse Other IP, and (b) any derivative works based on Brighthouse Other IP created by Brighthouse (or its Affiliates or vendors) after the Separation Date is excluded from the license granted in this Section 5.5. With respect only to this Section 5.5, the Territory includes the United States of America and any other territories in which Brighthouse Other IP is used solely by “MetLife Global Operations Support Center Private Limited” for the provision of services to Brighthouse as required by the Transaction Documents, and is further limited by any restrictions in such Transaction Documents.

 

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Section 5.6    No Limitation.

(a)    Nothing in this Agreement is designed to limit Brighthouse’s rights to information furnished under, and subject to, the terms of the Investment Management Agreement(s).

(b)    Notwithstanding the inclusion of any Metlife Other IP on Schedule D-2 or D-3, nothing in this Agreement shall prohibit a member of the Brighthouse Company Group from having access pursuant to any other agreement between the Parties or their Affiliates (i) to data generated by such Metlife Other IP and used in the Business prior to the Effective Date or (ii) access to a copy of the Metlife Other IP to the extent still maintained by MetLife or its Affiliates, in each case solely for historical purposes, including in connection with a litigation or a regulatory matter and, as necessary, subject to reasonable confidentiality restrictions directed by MetLife.

(c)    Subject to the licenses granted in this Section 5, the Parties acknowledge that certain Limited License Uses of the MetLife Other IP or Brighthouse Other IP may include incidental uses from employees temporarily located outside of the Territory or to customers residing outside of the Territory, which may result in MetLife Other IP or Brighthouse Other IP being displayed, published or otherwise made available for Limited License Use outside the Territory, and that such use, if otherwise in accordance with this Section 5, will not in and of itself, constitute a breach of the terms of this Section 5.

ARTICLE VI

COMPLIANCE WITH LAW; LICENSES, PERMITS,

REGULATIONS, REGISTRATIONS, ETC.

Section 6.1    Compliance with Law. Each Party shall comply with all applicable Laws in connection with its exercise of its rights and performance of its obligations under this Agreement.

Section 6.2    Government Licenses, Permits, and Approvals. Each Party, at its sole expense, shall be responsible for complying with any requirements of a Governmental Authority applicable to such Party with respect to this Agreement. Each Party shall provide the other Party with all documents reasonably requested by the other Party, at such requesting Party’s expense, in order to perform its obligations under this Section 6.2. Each Party shall furnish the other Party and/or its Affiliates written evidence from such regulatory authorities of any such licenses, permits, clearances, authorizations, or regulatory approvals at the other Party’s request and expense.

Section 6.3    Recordings. In the event a Party deems necessary the recordation of this Agreement (or any portion of this Agreement), the other Party shall cooperate with such Party, at such requesting Party’s expense, in connection with the recording of this Agreement (or any portion of this Agreement) with the appropriate Governmental Authorities and in the renewal of such recordation. Upon termination or expiration of this Agreement, the Parties shall cooperate to effect a cancellation or termination of any recordation of this Agreement (or relevant portion thereof) with the appropriate Governmental Authorities.

 

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ARTICLE VII

INTELLECTUAL PROPERTY PROTECTION

Section 7.1    Protection of Intellectual Property. Brighthouse and its Affiliates (with respect to the Licensed Brighthouse Marks and any other Brighthouse Other IP), and MetLife and its Affiliates (with respect to the Licensed MetLife Marks and any MetLife Other IP) shall have the sole right, at its sole cost and expense, to initiate, defend, and control actions with respect to, and the other Party shall reasonably cooperate with such Party (with such Party reimbursing the other Party for any out-of-pocket costs incurred by the other Party in providing such cooperation) in connection with infringement or other violation of such Intellectual Property, or claims by third parties that such Intellectual Property infringes or otherwise violates rights of such third party. Upon reasonable request, and at the expense of such requesting Party, a licensee Party shall timely provide reasonable assistance to the licensor Party in perfecting, registering and enforcing any Intellectual Property rights relating to the Licensed Marks, the MetLife Other IP or the Brighthouse Other IP.

Section 7.2    Confidentiality. “Confidential Information” means all information provided by the disclosing Party (the “Discloser”) to the receiving Party (the “Recipient”) hereunder that is proprietary and/or non-public related to the past, present and future business activities of the Discloser, its Affiliates and agents, including, without limitation, all information related to: (a) the Discloser’s employees, customers, and third-party contractors; (b) MetLife Other IP licensed for Limited License Use under this Agreement, or anything listed in Schedules D-1, D-2, D-3 or D-4, including but not limited to operational and business proposals and plans, pricing, financial information, methods, processes, code, data, lists (including customer lists), inventions, apparatus, statistics, programs, research, development, information technology, network designs, passwords, sign-on codes, and usage data; (c) the terms of this Agreement; and/or (d) any other information that the Discloser designates in writing as confidential. Confidential Information does not include information that the Recipient demonstrates is or was, at the time of the disclosure: (1) generally known or available to the public; (2) received by the Recipient from a third-party; (3) with the exception of any items referenced in Article V, information already in the Recipient’s possession prior to the date of receipt from Discloser; or (4) independently developed by the Recipient. At all times the Recipient shall: (a) use the same standard of care to protect the Confidential Information as it uses to protect its own confidential information of a similar nature, but not less than a commercially reasonable standard of care; (b) not use the Discloser’s Confidential Information other than as necessary to perform its obligations under this Agreement; (c) not disclose, distribute, or disseminate the Confidential Information to any third-party not under written obligations of confidentiality at least as stringent as hereunder; and (d) disclose the Discloser’s Confidential Information to its employees, agents, third party contractors and/or Affiliates on a “need to know” basis only, provided that each employee, agent, third-party contractor and Affiliate is bound by obligations of confidentiality and restrictions against disclosure at least as restrictive as those contain herein.

 

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ARTICLE VIII

TERM AND TERMINATION

Section 8.1    Term.

(a)    This Agreement (and the rights granted herein) shall become effective on the Effective Date or as otherwise explicitly stated herein and shall continue until the expiration of this Agreement (or with respect to a specific right, expiration of such right) pursuant to this Section 8.1, unless earlier terminated pursuant to Section 8.2 (the “Term”).

(b)    All licenses hereunder to Licensed Marks shall continue for (i) each Licensed MetLife Mark, for the duration that Brighthouse or its Affiliates use or do not abandon use (pursuant to applicable trademark Law in the Territory governing the abandonment of trademarks) of such mark in connection with its Business, to the extent that MetLife or its Affiliates retain ownership of such Licensed MetLife Mark, and (ii) each Licensed Brighthouse Mark, for the duration that MetLife or its Affiliates use or do not abandon use (pursuant to applicable trademark Law in the Territory governing the abandonment of trademarks) of such mark in connection with the Transaction Documents, to the extent that a Brighthouse Company member or its Affiliates retain ownership of such Licensed Brighthouse Mark.

Section 8.2    Material Breach.

(a)    Either Party may suspend a license to a particular Licensed Mark upon written notice to the other Party that such other Party is in material breach of this Agreement with respect to use of such Licensed Mark. Such suspension shall automatically take effect if the other Party does not cure the breach within thirty (30) days of such notice; provided, that the licensor Party may terminate such license if the other Party has not used all commercially reasonable efforts to promptly cure such breach during such period. Such suspension shall remain in effect until the licensor Party acknowledges that the breach has been cured to its reasonable satisfaction, such acknowledgement not to be unreasonably withheld. In no event shall such suspension or termination apply to the use of Licensed Marks by a licensee where such use is required by any applicable Laws, subject to such Party’s continued efforts to cure such breach and cooperate with such other Party in connection therewith. Notwithstanding the foregoing, in the event there is a Dispute with respect to whether the licensee Party is in a material breach of this Agreement or failed to timely cure such a breach, the licensor Party may not suspend or terminate the license under this Agreement until after the final resolution of the Dispute in favor of the licensor Party pursuant to Article XI, provided that, the foregoing shall not prelude the licensor Party from pursuing its rights under Section 11.5.

(b)    With respect to the licenses granted in Article V, MetLife may terminate any license with respect to MetLife Other IP, and Brighthouse may terminate any license with respect to Brighthouse Other IP, if the other Party does not cure a breach of this Agreement with respect to such Intellectual Property, respectively within thirty (30) days of written notice to such Party; provided that if Brighthouse terminates any license to Brighthouse Other IP hereunder, then MetLife and its Affiliates shall be relieved of its obligations under any Transaction Document, if any, solely to the extent that such obligation is dependent upon a license to such Brighthouse Other IP to which the license is being terminated.

 

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Section 8.3    Termination of Rights to Licensed Marks. Upon the expiration or termination of this Agreement (with respect to both Parties in connection with the Licensed Marks), or of any rights to Licensed Marks (with respect to the Party whose rights have been terminated with respect to particular Licensed Marks):

(a)    Subject to Section 8.3(b), such Party’s license to use such Licensed Marks immediately and automatically shall terminate and all rights of such Party (and its Affiliates and sublicensees) to such Licensed Marks, including any associated goodwill, under this Agreement shall revert to the other Party;

(b)    Such Party shall (and shall cause its Affiliates and sublicensees to), within sixty (60) days from the expiration or termination of this Agreement (such period, the “Transitional Period”), discontinue using such Licensed Marks and remove such Licensed Marks from all promotional and advertisement materials, stationery, computer and electronic systems, and any and all documents (whether in written, electronic, optical, or other form) in the possession and control of such Party (and its Affiliates and sublicensees), and during the Transitional Period (the last day of such period being the “Cessation Date”) all of the obligations of such Party (and its Affiliates sublicensees) hereunder shall remain in force; provided, however, that such Party shall not be required to remove such Licensed Marks from non-public business records of such Party or its Affiliates (whether in written, electronic, optical, or other form) or as required by Law or a Party’s standard archiving practices.

(c)    Subject to Section 8.3(b), upon the Cessation Date, such Party shall (and shall cause its Affiliates and sublicensees to) destroy, to the extent commercially feasible, all materials utilizing such Licensed Marks; and

(d)    Subject to Section 8.3(b), upon the Cessation Date, such Party shall (and shall cause its Affiliates and sublicensees to) not use any name or mark that is confusingly similar to or dilutive of such Licensed Marks.

(e)    Notwithstanding the foregoing, a Party shall not be required to cease a particular use of a particular Licensed Mark subject to such termination if and to the extent that such continued use of such mark is required by Law, provided that such Party (i) promptly notifies the other Party in writing of such requirement, (ii) uses all commercially reasonable efforts to cease such use and still comply with Law, and (iii) cooperates with the other Party with respect to such efforts to cease use without violating any Law. For purposes of clarification, the foregoing shall not relieve a Party from its obligation to cure a breach of this Agreement.

Section 8.4    Termination of Rights to MetLife Other IP and Brighthouse Other IP. To the extent that any rights to use MetLife Other IP or Brighthouse Other IP pursuant to Article V shall terminate pursuant to Section 8.2, Brighthouse and its Affiliates shall immediately cease and desist from all further use of such MetLife Other IP (and any derivative works based on such MetLife Other IP), and MetLife shall immediately cease and desist from all further use of such Brighthouse Other IP (and any derivative works based on such Brighthouse Other IP); provided that upon termination of this Agreement, copies of the MetLife Other IP and any derivative works based upon such MetLife Other IP (in the case of Brighthouse and its Affiliates) and copies of the Brighthouse Other IP and any derivative works based upon such Brighthouse Other IP (in the case of MetLife) may be retained by the respective licensee(s) for its internal archival purposes, in accordance with ordinary record retention policies, to document history uses thereof or as required by applicable law.

 

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Section 8.5    Survival. The provisions of Sections 3.1, 3.3, 6.3, 7.2, 8.3, 8.4, this 8.5 and Articles 9, 10 and 11 shall survive any expiration or termination of this Agreement.

ARTICLE IX

DEFENSE AND INDEMNIFICATION

Section 9.1    Indemnification

(a)    Each Party (the “Indemnifying Party”) shall indemnify and hold harmless the other Party and its Affiliates, and their respective directors, officers, employees and agents (the “Indemnified Parties”) with respect to any Losses incurred with respect to a claim by an unaffiliated third party arising, directly or indirectly, from any use by the Indemnified Parties, or any of their sublicensees, of the other Party’s Licensed Marks or licensed Intellectual Property (i) if and to the extent such claim is based on content added by Indemnifying Party to (x) the MetLife Other IP (where the Indemnifying Party is Brighthouse) or (y) the Brighthouse Other IP (where the Indemnifying Party is MetLife); or (ii) if and to the extent that such claim arises from use by the Indemnifying Party that is outside the scope of the rights granted to it hereunder by the Indemnified Party; provided that the Indemnified Party notifies the Indemnifying Party promptly in writing after becoming aware of such claim; and provided further that a delay in such notification shall not relieve the Indemnifying Party from its obligations to indemnify unless such delay has materially prejudiced the Indemnifying Party’s right and ability to defend itself against such claim. The Indemnified Party shall have the sole right to control the defense of any such action with counsel of its choice and to enter into a stipulation of discontinuance and settlement thereof, subject to reasonable consultation with the Indemnifying Party, so long as the settlement does not impose any financial or other burdens on the Indemnifying Party or include an admission of wrongdoing by the Indemnified Party.

(b)    With respect to a claim by an unaffiliated third party that the use of the Licensed MetLife Marks or MetLife Other IP (licensed in Article V) infringes the Intellectual Property rights of such third party, Brighthouse or its Affiliates must promptly phase out use of such challenged mark or MetLife Other IP in the relevant jurisdiction(s) if, in MetLife’s reasonable judgment, there exist colorable grounds for such third-party claim. With respect to a claim by an unaffiliated third party that the use of the Licensed Brighthouse Marks or Brighthouse Other IP (licensed in Article V) infringes the Intellectual Property rights of such third party, MetLife or its Affiliates must promptly phase out use of such challenged mark or Brighthouse Other IP in the relevant jurisdiction(s) if, in Brighthouse’s reasonable judgment, there exist colorable grounds for such third-party claim.

 

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ARTICLE X

DISCLAIMER

Section 10.1    DISCLAIMER OF REPRESENTATIONS AND WARRANTIES. EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES WHATSOEVER, WHETHER EXPRESS, IMPLIED OR STATUTORY REGARDING ANY OF THE LICENSED MARKS, OR METLIFE OTHER IP OR BRIGHTHOUSE OTHER IP LICENSED OR OTHERWISE PROVIDED HEREUNDER. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH PARTY ACKNOWLEDGES THAT THE LICENSE GRANTED IN THIS AGREEMENT, AND THE LICENSED MARKS LICENSED, OR METLIFE OTHER IP OR BRIGHTHOUSE OTHER IP OR OTHERWISE PROVIDED HEREUNDER ARE PROVIDED “AS IS.”

Section 10.2    Limitations of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY OR ITS AFFILIATES OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, OR AGENTS HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY OTHER PERSON FOR ANY INDIRECT DAMAGES (INCLUDING PUNITIVE AND CONSEQUENTIAL DAMAGES) ARISING OUT OF OR IN ANY MANNER CONNECTED WITH THIS AGREEMENT, THE PERFORMANCE OR BREACH HEREOF, OR THE SUBJECT MATTER HEREOF WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED, OR OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY, OF SUCH DAMAGES. NOTWITHSTANDING THE FOREGOING, THIS LIMITATION ON LIABILITY SHALL (1) NOT APPLY TO DAMAGES SOUGHT BY A THIRD PARTY WITH RESPECT TO A CLAIM BY SUCH THIRD PARTY FOR WHICH A PARTY IS ENTITLED TO INDEMNITY HEREUNDER, AND (2) EXPLICITLY APPLY TO ANY CLAIMS BASED ON BRIGHTHOUSE’S (OR ITS AFFILIATES’) USE OF TRADEMARKS, SERVICE MARKS OR PRODUCT NAMES LISTED IN SCHEDULE C.

ARTICLE XI

DISPUTE RESOLUTION

Section 11.1    General Provisions.

(a)    Except as otherwise contemplated in this Agreement, any and all disputes, controversies or claims arising out of or relating to this Agreement or the validity, interpretation, breach or termination thereof (a “Dispute”), shall be resolved by mediation or arbitration in accordance with the procedures set forth in this Article XI, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified below.

(b)    All communications (including the Initial Notice, Response and the Mediation Notice, defined below) between the Parties or their representatives in connection with the attempted resolution of any Dispute, including any mediator’s evaluation, if any, arising out of the process described in Section 11.3, shall be deemed to have been delivered in furtherance of a Dispute settlement, shall be exempt from discovery and production, and shall be treated under the standards set forth in Rule 408 of the Federal Rules of Evidence and all applicable state counterparts protecting the confidentiality of mediations or settlement discussions.

 

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(c)    The Parties expressly waive and forgo any right to (i) special, indirect, incidental, punitive, consequential, exemplary, statutorily-enhanced or similar damages in excess of compensatory damages (provided that liability for any such damages with respect to a Claim shall be considered direct damages) and (ii) trial by jury.

(d)    The specific procedures set forth below, including, but not limited to, the time limits referenced therein, may be modified by agreement of the Parties in writing.

(e)    All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Article XI are pending. The Parties shall take such action, if any, required to effectuate such tolling.

Section 11.2.    Business Level Resolution. If a Dispute is not resolved in the normal course of business at the operational level, the Parties shall first attempt in good faith to resolve such Dispute by negotiation between executives who hold, at a minimum, the office of Vice President of the respective business entities involved in such Dispute or their respective senior level designees. Either Party may initiate the executive negotiation process by providing a written notice to the other (the “Initial Notice”). Five (5) Business Days after delivery of the Initial Notice, the receiving party shall submit to the other a written response (the “Response”). The Initial Notice and the Response shall include (i) a statement of the Dispute and of each Party’s position, and (ii) the name and title of the executive who will represent that party and of any other person who will accompany the executive. Such executives will meet in person or by telephone within ten (10) Business Days of the date of the Initial Notice to seek a resolution of the Dispute. If such senior executives or their respective designees decline to meet within the allotted time, or if they meet, but fail to resolve the Dispute within twenty (20) Business Days after receipt of the Initial Notice, then, upon the election of either Party in its sole discretion, the Parties shall pursue mediation as the remedy set forth in Section 11.3 and, as applicable, arbitration pursuant to Section 11.4.

Section 11.3.    Mediation. Except as otherwise contemplated in this Agreement, if the procedures set forth in Section 11.2 have been followed with respect to a Dispute and such Dispute remains unresolved or otherwise following the twentieth (20th) Business Day following receipt of the Initial Notice, the Dispute shall be submitted for resolution to non-binding, confidential mediation by a written notice to the other Party (the “Mediation Notice”), which such submission to mediation shall occur within thirty (30) days of delivery of the Mediation Notice. The Parties shall mutually select a mediator; provided that if the Parties are unable to select a mutually agreeable mediator within twenty (20) days following the Mediation Notice, the International Institute for Conflict Prevention and Resolution (the “CPR”), at the written request of either Party, shall designate a mediator.

Section 11.4.    Arbitration; Procedures.

(a)    If a Dispute is not resolved by mediation as provided in Section 11.3 within ninety (90) days of the Initial Notice (or any longer period that the Parties may agree to in writing), the mediation contemplated in Section 11.3 shall terminate and the Dispute shall be submitted for resolution to binding arbitration to be held in New York, New York. The arbitration shall be solely between the parties to the Dispute and shall be conducted in accordance with the CPR Rules for Non-Administered Arbitration as then in effect except as modified by the provisions of this Article IV (the “Arbitration Rules”).

 

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(b)    The neutral organization for purposes of the Arbitration Rules shall be the CPR. The arbitration shall be conducted before a panel of three arbitrators (the “Arbitration Panel”), of whom each Party shall appoint one arbitrator in accordance with the Arbitration Rules and the two Party-designated arbitrators shall jointly select the third arbitrator in accordance with the Arbitration Rules; provided that no arbitrator may serve on the panel unless (i) such arbitrator has in the past served as an officer of a financial services company, is otherwise reasonably experienced in such industry, and has experience with trademark matters, and (ii) he or she has agreed in writing to enforce the terms of, and conduct the arbitration in accordance with, the provisions of this Article XI. The arbitration shall be conducted in New York City. A written transcript of the proceedings shall be made and furnished to the Parties. Except with respect to the interpretation and enforcement of the Arbitration Procedures (which shall be governed by the Federal Arbitration Act), the arbitrators shall determine the Dispute and make the Determination in accordance with the law of the State of New York, without giving effect to any conflict of law rules, its choice of law principles or other rules that might render such law inapplicable or unavailable, and shall apply this Agreement and the Transaction Documents according to their respective terms.

(c)    The Parties agree to be bound by any award or order resulting from any arbitration conducted in accordance with this Section 11.4 and further agree that judgment on any award or order resulting from an arbitration conducted under this Section 11.4 may be entered and enforced in any court having jurisdiction thereof. The Parties agree that each and every arbitration shall be treated as confidential and before making any disclosure permitted by the CPR Arbitration Rules, a Party shall give written notice to the other Party and shall, at such other Party’s request, make reasonable efforts to protect and preserve the confidentiality of any information disclosed in an arbitration.

(d)    The Arbitration Panel shall establish a set of procedures for the arbitration (the “Arbitration Procedures”), which shall include but not be limited to (i) that each Party shall submit to the Arbitration Panel, and exchange with the other Party, a written offer of compromise, constituting such Party’s best offer, with terms to resolve the Dispute (each such offer, an “Offer”), (ii) that the Arbitration Panel shall be limited to awarding either (x) only one or the other of the two Offers submitted, or (y) an award that shall not be in excess of the higher, nor less than the lower, of the amounts represented by the Offers, as applicable, or , (iii) that discovery shall be conducted in accordance with the Arbitration Rules and (iv) that all aspects of the arbitration shall be treated as confidential. The Arbitration Panel shall deliver a written statement resolving the Dispute (the “Determination”); provided that the Arbitration Panel shall not in its Determination provide either Party with terms more favorable than those set forth in the Offer provided by the other Party. The Arbitration Panel may render the Determination by means of a summary disposition relative to all or some of the issues in the Dispute; provided that the Party that opposes such summary disposition has had an adequate opportunity to respond to the application for such summary disposition. Except as expressly permitted by this Agreement, no Party shall commence or voluntarily participate in any court action or proceeding concerning a Dispute, except (i) for enforcement as contemplated by Section 11.4(c) or (ii) to restrict or vacate an arbitral decision based on the grounds specified under applicable law. For purposes of the foregoing, the Parties submit to the non-exclusive jurisdiction of the courts of the State of New York.

 

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(e)    Each Party shall bear its own attorneys’ fees and costs incurred in connection with the resolution of any Dispute in accordance with this Article XI; provided that the Parties shall share the fees and expenses of both the mediators and Arbitration Panel equally.

Section 11.5    Equitable Remedies. Notwithstanding anything to the contrary in this Agreement, the Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to seek injunctive relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, in each case without posting a bond or undertaking, this being in addition to any other remedy to which they are entitled at Law or in equity. Each of the Parties agrees that it shall not oppose the granting of an injunction, specific performance and other equitable relief on the basis that (i) the Party seeking such remedy has an adequate remedy at Law or (ii) an award of specific performance is not an appropriate remedy for any reason at Law or equity. Each of the Parties irrevocably submits to the exclusive jurisdiction of any state or federal court located within the County of New York in the State of New York for the purposes of any suit, action or other proceeding arising out of or permitted by this Section 11.5, and agrees to commence any such action, suit or proceeding only in such courts.

ARTICLE XII

MISCELLANEOUS

Section 12.1    Corporate Power; Fiduciary Duty.

(a)    MetLife and Brighthouse each represent on behalf of itself as follows:

(i)    each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby and thereby; and

(ii)    this Agreement has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms hereof and thereof.

(b)     Notwithstanding any provision of this Agreement, neither of Licensor nor Licensee, nor any of their respective Affiliates, shall be required to take or omit to take any act that would violate its fiduciary duties to any minority stockholders of Licensor, Licensee or any non-wholly-owned subsidiary of Licensor or Licensee, as the case may be (it being understood that directors’ qualifying shares or similar interests shall be disregarded for purposes of determining whether a subsidiary is wholly-owned).

 

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Section 12.2     Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York irrespective of the choice of Laws principles of the State of New York other than Section 5-1401 of the General Obligations Law of the State of New York.

Section 12.3    Survival of Covenants. Except as expressly set forth in this Agreement, the covenants and other agreements contained in this Agreement, and liability for the breach of any obligations contained herein, shall survive each of the Separation Date and the Term and shall remain in full force and effect.

Section 12.4    Force Majeure. No Party (or any Person acting on its behalf) shall have any liability or responsibility for failure to fulfill any obligation (other than a payment obligation) under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered or delayed as a consequence of circumstances of Force Majeure. A Party claiming the benefit of this provision shall, as soon as reasonably practicable after the occurrence of any such event: (i) notify the other Party of the nature and extent of any such Force Majeure condition and (ii) use due diligence to remove any such causes and resume performance under this Agreement as soon as reasonably practicable.

Section 12.5     Notices. Except as otherwise expressly provided herein, all notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) (i) by delivery in person, (ii) by overnight courier service, (iii) by facsimile or email with receipt confirmation, or (iv) by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 12.5):

If to Licensor, to:

MetLife Law Dept.

200 Park Avenue

New York, NY 10166

Attention: Ricardo Anzaldua, General Counsel

Email: ranzaldua@metlife.com

With copy to:

MetLife Law Dept.

200 Park Avenue

New York, NY 10166

Attn: Jonathan Damon, Associate General Counsel, Intellectual Property Unit

Email: jdamon1@metlife.com

If to Licensee, to:

Brighthouse Services, LLC

c/o Brighthouse Financial, Inc.

Gragg Building

11225 North Community Drive

Charlotte, North Carolina 28277

 

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With a copy to:

Brighthouse Services, LLC

c/o Brighthouse Financial, Inc.

Attn: Christine De Biase, General Counsel

Gragg Building

11225 North Community Drive

Charlotte, North Carolina 28277

Any notice or communication hereunder shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if sent by facsimile or email; and five (5) calendar days after mailing if sent by registered or certified mail (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee).

Section 12.6    Severability. If any term or other provision of this Agreement is deemed by an Arbitration Panel or a court of Law to be invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties to this Agreement 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 terms and conditions of this Agreement be consummated as originally contemplated to the greatest extent possible.

Section 12.7    Entire Agreement. Except as otherwise expressly provided in this Agreement, this Agreement (including the Schedules hereto) constitutes the entire agreement of the Parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the Parties with respect to the subject matter of this Agreement.

Section 12.8    Assignment; No Beneficiaries. This Agreement shall not be assigned by any Party without the prior written consent of the other Party; provided, however, that either Party may assign any or all of its rights and obligations hereunder to any of its Affiliates so long as such assignment does not release such Party from any liability hereunder incurred prior to such assignment. Except as provided in Article IX, with respect to Licensor Indemnitees or Licensee Indemnitees, as applicable, this Agreement is for the sole benefit of the Parties to this Agreement and their respective Affiliates and each of their permitted successors and assigns and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 12.10    Public Announcements. The Parties shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to this Agreement and the transactions contemplated in this Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

 

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Section 12.11    Amendment. No provision of this Agreement may be amended or modified except by a written instrument signed by each of the Parties. Either Party may, in its sole discretion, waive any and all rights granted to it in this Agreement; provided that no waiver by either Party of any provision hereof shall be effective unless explicitly set forth in writing and executed by the Party so waiving. The waiver by either Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach. No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

Section 12.12    Rules of Construction. Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include the other gender as the context requires; (b) references to the terms Preamble, Recital, Article, Section, paragraph, and Schedule are references to the appropriate Preamble, Recitals, Articles, Sections, paragraphs, and Schedules to this Agreement unless otherwise specified; (c) references to “$” means U.S. dollars; (d) the word “including” and words of similar import when used in this Agreement means “including without limitation,” unless otherwise specified; (e) the word “or” shall not be exclusive; (f) the words “herein,” “hereof,” “hereunder” or “hereby” and similar terms are to be deemed to refer to this Agreement as a whole and not to any specific section unless expressly stated otherwise; (g) the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement; (h) 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; (i) if a word or phrase is defined, the other grammatical forms of such word or phrase shall have a corresponding meaning; (j) references to any statute, listing rule, rule, standard, regulation or other Law include a reference to (1) the corresponding rules and regulations and (2) each of them as amended, modified, supplemented, consolidated, replaced or rewritten from time to time; and (k) references to any section of any statute, listing rule, rule, standard, regulation or other Law include any successor to such section.

Section 12.13    Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties to each such agreement in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or PDF shall be as effective as delivery of a manually executed counterpart of any such Party.

[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.

 

METROPOLITAN LIFE INSURANCE COMPANY
By:  

 

Name:  
Title:  
BRIGHTHOUSE SERVICES, LLC
By:  

 

Name:  
Title:  

 

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EXHIBIT 1

BRIGHTHOUSE COMPANY GROUP

EXHIBIT 2

TRANSACTION DOCUMENTS

SCHEDULE A

LICENSED METLIFE MARKS

SCHEDULE B

LICENSED BRIGHTHOUSE MARKS

SCHEDULE C

NON-OBJECTIONABLE MARKS AND NAMES

SCHEDULE D

EXCEPTIONS TO THE LICENSE TO USE METLIFE OTHER IP

D-1 – MetLife Other IP Used by US Retail Prior to Effective Date Not Available to License to Brighthouse

D-2 – MetLife Other IP Not Used by US Retail Prior to Effective Date and (For Clarity) Not Available to License to Brighthouse

D-3 – MetLife Other IP That May or May Not Have Been Used by US Retail Prior to Effective Date and May Only Be Available to Brighthouse by Request (at MetLife’s Discretion)

D-4 – MetLife Actuarial IP for 5 Year Limited License to Brighthouse

EX-10.5

Exhibit 10.5

FORM OF

TAX RECEIVABLES AGREEMENT

dated as of

[•]

between

MetLife, Inc.

and

Brighthouse Financial, Inc.

 

 


TABLE OF CONTENTS

 

          Page  
ARTICLE I       
DEFINITIONS       

Section 1.01.

  

Definitions

     2  
ARTICLE II       
DETERMINATION OF REALIZED TAX BENEFIT       

Section 2.01.

  

Transaction Tax Asset Utilization

     7  

Section 2.02.

  

Existence of Transaction Tax Assets

     7  

Section 2.03.

  

Tax Benefit Schedule

     7  

Section 2.04.

  

Procedures, Amendments

     7  
ARTICLE III       
TAX BENEFIT PAYMENTS       

Section 3.01.

  

Payments

     8  

Section 3.02.

  

No Duplicative Payments

     9  

Section 3.03.

  

No Excess Payments

     9  
ARTICLE IV       
TERMINATION       

Section 4.01.

  

Termination, Breach of Agreement, Change of Control

     9  

Section 4.02.

  

Early Termination Schedule

     10  

Section 4.03.

  

Payment upon Early Termination

     11  
ARTICLE V       
LATE PAYMENTS, ETC.       

Section 5.01.

  

Late Payments by Brighthouse

     12  

Section 5.02.

  

Compliance with Indebtedness and Applicable Law

     12  
ARTICLE VI       
CONSISTENCY; COOPERATION       

Section 6.01.

  

MetLife’s Participation in Brighthouse Tax Matters

     12  

Section 6.02.

  

Consistency

     13  

Section 6.03.

  

Cooperation

     13  

 

i


ARTICLE VII       
MISCELLANEOUS       

Section 7.01.

  

Notices

     13  

Section 7.02.

  

Counterparts

     14  

Section 7.03.

  

Entire Agreement; Third Party Beneficiaries

     15  

Section 7.04

  

Assignability

     15  

Section 7.05.

  

Governing Law

     15  

Section 7.06.

  

Severability

     15  

Section 7.07.

  

Amendments; Waivers

     15  

Section 7.08.

  

Titles and Subtitles

     15  

Section 7.09.

  

Resolution of Disputes

     16  

Section 7.10.

  

Reconciliation

     16  

Section 7.11.

  

Treatment of Payments

     17  

Section 7.12.

  

Affiliated Corporations; Admission of Brighthouse into a Consolidated Group; Transfers of Corporate Assets

     17  

Section 7.13.

  

Confidentiality

     18  

Section 7.14.

  

Headings

     18  

 

ii


This TAX RECEIVABLES AGREEMENT (as amended from time to time, this “Agreement”), is hereby entered into by and between MetLife, Inc., a Delaware corporation (“MetLife”) and Brighthouse Financial, Inc., a Delaware corporation (“Brighthouse”).

RECITALS

WHEREAS, MetLife (as defined above), in the aggregate, holds 100% of the common stock of Brighthouse, directly or indirectly, immediately prior to the closing of the Distribution (as defined below);

WHEREAS, (i) a subsidiary of MetLife, MetLife Reinsurance Company of Vermont (“MRV”) formed MetLife Reinsurance Company of Vermont II (“New MRV”), a Vermont corporation, with minimal capital necessary for its organization and licensed New MRV as a sponsored captive insurance company; (ii) MRV entered into a binding commitment to sell the non-voting preferred stock of New MRV (the “New MRV Preferred Stock”) to MetLife Ireland Treasury D.A.C. (“MetLife Ireland”); (iii) MRV transferred its Protected Cell No. 2 (“MRV Cell 2”) to New MRV in exchange for the voting common stock of New MRV (the “New MRV Common Stock”) and the New MRV Preferred Stock; (iv) MRV converted MRV Cell 2 into a stand-alone captive insurance company pursuant to filing under Vermont law and merged such stand-alone captive insurance company with and into New MRV; (v) MRV sold all of the New MRV Preferred Stock to MetLife Ireland; (vi) MRV distributed the New MRV Common Stock to MetLife; (vii) MetLife contributed the New MRV Common Stock to MetLife Insurance Company USA; and (viii) New MRV was merged with and into Brighthouse Reinsurance Company of Delaware (these steps, the “MRV Cell 2 Transfer”);

WHEREAS, MetLife intends to effect the Distribution;

WHEREAS, after the Distribution, Brighthouse and its Subsidiaries (as defined below) (the “Taxable Entities” and each a “Taxable Entity”) will have the ability to realize tax amortization of certain intangible assets relating to the MRV Cell 2 Transfer, and will have a fair market value basis in all the assets formerly owned by MRV Cell 2 immediately before the MRV Cell 2 Transfer;

WHEREAS, Tax Assets (as defined below) arising from the MRV Cell 2 Transfer (such change in Tax Assets as set forth on Schedule A, as adjusted from time to time as mutually agreed by the parties, the “Transaction Tax Assets”) may reduce the reported liability for Taxes (as defined below) that the Taxable Entities might otherwise be required to pay;

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Transaction Tax Assets on the reported liability for Taxes of the Taxable Entities; and

WHEREAS, this Agreement is intended to provide payments to MetLife in an amount equal to the Benefit Percentage of the aggregate reduction in the reported liability for Taxes of the Taxable Entities from the utilization of the Transaction Tax Assets.

 

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NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

Advisory Firm” means any law or accounting firm that is (A) nationally recognized as being expert in Tax matters and (B) agreed to by Brighthouse and MetLife.

Advisory Firm Report” means (a) an attestation report from the Advisory Firm expressing an opinion on management’s assertion as to whether the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared, in all material respects, in accordance with the Agreement, or (b) another type of report or letter from the Advisory Firm related to whether the information in the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared in a manner consistent with the terms of the Agreement.

Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

Agreed Rate” means LIBOR plus 100 basis points.

Agreement” is defined in the preamble of this Agreement.

Amended Schedule” is defined in Section 2.04(b) of this Agreement.

Bankruptcy Code” means Title 11 of the United States Code.

Benefit Percentage” means the sum of (i) eighty-five percent (85%) plus (ii) the Deemed State Percentage.

Board” means the board of directors of Brighthouse.

Brighthouse” is defined in the preamble of this Agreement.

Brighthouse Return” means a U.S. federal income tax return of any of the Taxable Entities filed with respect to any Taxable Year.

Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America, or the State of New York shall not be regarded as a Business Day.

 

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Change of Control” means:

(i) a merger, reorganization, consolidation or similar form of business transaction directly involving Brighthouse or indirectly involving Brighthouse through one or more intermediaries unless, immediately following such transaction, more than 50% of the voting power of the then outstanding voting stock or other equity of Brighthouse resulting from consummation of such transaction (including, without limitation, any parent or ultimate parent corporation of such Person that as a result of such transaction owns directly or indirectly Brighthouse and all or substantially all of Brighthouse’s assets) is held by the existing Brighthouse equityholders or their Affiliates (determined immediately prior to such transaction and related transactions); or

(ii) a transaction in which Brighthouse, directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to another Person other than an Affiliate; or

(iii) a transaction in which there is an acquisition of control of Brighthouse by a Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as amended, or any successor provisions thereto. For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to either (i) vote more than 50% of the securities having ordinary voting power for the election of directors (or comparable positions in the case of partnerships and limited liability companies), or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise (for the avoidance of doubt, consent rights do not constitute control for the purpose of this definition); or

(iv) the liquidation or dissolution of Brighthouse.

Code” means the Internal Revenue Code of 1986, as amended.

Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

Default Rate” means LIBOR plus 650 basis points.

Deemed State Percentage” means one percent (1%).

Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

Distribution” means the pro rata distribution of at least 80.1% of the stock of Brighthouse by MetLife to the shareholders of MetLife.

 

- 3 -


Distribution Tax Separation Agreement” means that certain Tax Separation Agreement between MetLife and Brighthouse governing (among other things) the allocation of pre-Distribution Taxes and the preparation of Tax Returns related thereto.

Divestiture” means the sale of any Taxable Entity (to other than an Affiliate), other than any such sale that is, or is part of, a Change of Control.

Divestiture Acceleration Payment” is defined in Section 4.03(c) of this Agreement.

Early Complete Termination” is defined in Section 4.01(b) of this Agreement.

Early Termination Date” means (i) in the event of an Early Complete Termination, sixty calendar days following the date the Early Termination Notice is delivered under Section 4.01(b), (ii) in the event of a breach of this Agreement to which Section 4.01(c) applies, the date of such breach, (iii) in the event of a Change of Control, the effective date of such Change of Control and (iv) in the event of a Divestiture, the effective date of such Divestiture.

Early Termination Event” means (i) an Early Complete Termination, (ii) a breach of this Agreement to which Section 4.01(c) applies and (iii) a Change of Control.

Early Termination Notice” is defined in Section 4.01(b) of this Agreement.

Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

Early Termination Rate” means the lesser of (i) 6.5% per annum, compounded annually, and (ii) LIBOR plus 100 basis points.

Early Termination Schedule” is defined in Section 4.02 of this Agreement.

Expert” is defined in Section 7.10 of this Agreement.

Interest Amount” is defined in Section 3.01(b) of this Agreement.

ITR Payment” means any Tax Benefit Payment, Early Termination Payment, or Divestiture Acceleration Payment required to be made by Brighthouse to MetLife under this Agreement.

LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the rate per annum reported, on the date two days prior to the first day of such month, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such month (or portion thereof).

Material Objection Notice” has the meaning set forth in Section 4.02.

MetLife” is defined in the preamble of this Agreement.

MetLife Ireland” is defined in the preamble of this Agreement.

 

- 4 -


MRV” is defined in the preamble of the Agreement.

MRV Cell 2” is defined in the preamble of this Agreement.

MRV Cell 2 Transfer” is defined in the preamble of this Agreement.

Net Tax Benefit” has the meaning set forth in Section 3.01(b).

New MRV” is defined in the preamble of this Agreement.

New MRV Common Stock” is defined in the preamble of the Agreement.

New MRV Preferred Stock” is defined in the preamble of this Agreement.

Objection Notice” has the meaning set forth in Section 2.04(a).

Other Tax Assets” means any Tax Asset other than a Transaction Tax Asset.

Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

Realized Tax Benefit” means, for a Taxable Year, the reduction in the liability for federal income Taxes of a Taxable Entity for such Taxable Year resulting from the Transaction Tax Assets under the Agreement (giving effect to the principles of Section 3.02). If all or a portion of the liability for Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

Reconciliation Dispute” has the meaning set forth in Section 7.09(a) of this Agreement.

Reconciliation Procedures” means those procedures set forth in Section 7.09 of this Agreement.

Ruling 9” has the meaning set forth in Section 2.02 of this Agreement.

Schedule” means any Tax Benefit Schedule and any Early Termination Schedule.

Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.

Tax Asset” means net operating losses, capital losses, tax basis, and amortization or depreciation deductions with respect to assets (including assets described in Sections 197 and 848) or insurance tax reserves/liabilities.

 

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Tax Benefit” is defined in Section 3.01(b) of this Agreement.

Tax Benefit Payment” is defined in Section 3.01(a) of this Agreement.

Tax Benefit Schedule” is defined in Section 2.02 of this Agreement.

Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

Taxable Entity” is defined in the preamble of this Agreement.

Taxable Year” means a taxable year as defined in Section 441(b) of the Code (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made) ending after the date of the Distribution.

Taxes” means any and all U.S. federal taxes, assessments or similar charges measured with respect to net income or profits and any interest related to such Tax.

Taxing Authority” means the U.S. Internal Revenue Service.

Transaction Tax Assets” has the meaning set forth in the preamble of this Agreement.

Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise.

Transferred Tax Assets” means, in the event of a Divestiture, the Transaction Tax Assets attributable to the Taxable Entity that is sold in such Divestiture to the extent such Transaction Tax Assets are transferred with such Taxable Entity under applicable Tax law following the Divestiture (disregarding any limitation on the use of such Transaction Tax Assets as a result of the Divestiture) and do not remain under applicable Tax law with Brighthouse or any of its Subsidiaries (other than the Taxable Entity that is sold in such Divestiture).

Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

Valuation Assumptions” means, as of an Early Termination Date, the assumptions that (i) in each Taxable Year ending on or after such Early Termination Date, the Taxable Entities will generate an amount of taxable income sufficient to fully utilize the Transaction Tax Assets (in accordance with all applicable limitations) arising in such Taxable Year and future Taxable Years; (ii) the utilization of the Transaction Tax Assets for such Taxable Year and future Taxable Years, will be determined based on the Tax laws in effect on the Early Termination Date; and (iii) the federal income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code as in effect on the Early Termination Date.

 

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ARTICLE II

DETERMINATION OF REALIZED TAX BENEFIT

Section 2.01. Transaction Tax Asset Utilization. Brighthouse, on the one hand, and MetLife, on the other hand, acknowledge that the Taxable Entities may utilize the Transaction Tax Assets to reduce the amount of Taxes that the Taxable Entities would otherwise be required to pay.

Section 2.02. Existence of Transaction Tax Assets. In the event the Taxing Authority does not provide Ruling 9 requested by MetLife in the “Request for Rulings on Significant Issues Related to Section 355”, dated as of September 20, 2016, as supplemented thereafter (“Ruling 9”), MetLife shall use commercially reasonable efforts to obtain, at MetLife’s expense, a written opinion of any law or accounting firm that is nationally recognized as being expert in Tax matters, which opinion concludes with at least a “should” level of confidence that any ruling described above that the Taxing Authority does not provide are nonetheless true and that Taxable Entities will be entitled to take into account the Transaction Tax Assets.

Section 2.03. Tax Benefit Schedule. Within forty-five (45) calendar days after the filing of the Brighthouse Return for any Taxable Year for which there is a Realized Tax Benefit, Brighthouse shall provide to MetLife a schedule showing, in reasonable detail, (i) the calculation of the Realized Tax Benefit for such Taxable Year, (ii) the calculation of any payment to be made to MetLife pursuant to Article III with respect to such Taxable Year, and (iii) all requested supporting information pursuant to Section 2.04(a) of this Agreement reasonably necessary to support the calculation of such payment (a “Tax Benefit Schedule”). The Tax Benefit Schedule will become final as provided in Section 2.04(a) and may be amended as provided in Section 2.04(b) (subject to the procedures set forth in Section 2.04(a)).

Section 2.04. Procedures, Amendments.

(a) Procedure. Whenever Brighthouse delivers to MetLife an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.04(b), and including any Early Termination Schedule or amended Early Termination Schedule, Brighthouse shall also (x) deliver to MetLife any schedules, valuation reports, and work papers providing reasonable detail regarding the preparation of the Schedule or an Advisory Firm Report with respect to such Schedule and (y) allow MetLife and its advisors reasonable access at no cost to the appropriate representatives at each of Brighthouse and/or the Advisory Firm in connection with a review of such Schedule. The applicable Schedule shall become final and binding on all parties on the thirtieth (30th) calendar day after MetLife receives any Schedule or amendment thereto, unless the Parties agree to an extension in connection with MetLife’s review, or MetLife provides Brighthouse with notice prior to such thirtieth (30th) calendar day after receipt of such Schedule of a material objection, made in good faith, to such Schedule (an “Objection Notice”). If the parties, for any reason, are unable to successfully resolve the issues raised in any Objection Notice within thirty (30) calendar days of receipt by Brighthouse of such Objection Notice, Brighthouse and MetLife shall employ the Reconciliation Procedures.

 

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(b) Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by Brighthouse (i) in connection with a Determination affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to MetLife, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, or (iv) to reflect a material change (relative to the amounts in the original Schedule) in the Realized Tax Benefit for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, in each case with respect to any Taxable Entity (such amended Schedule, an “Amended Schedule”); provided, however, that such a change under clause (i) attributable to an audit of a Tax Return by an applicable Taxing Authority shall not be taken into account on an Amended Schedule unless and until there has been a Determination with respect to such change. Brighthouse shall provide any Amended Schedule to MetLife within thirty (30) calendar days of the occurrence of an event referred to in clauses (i) through (iv) of the preceding sentence, and any such Amended Schedule shall be subject to the procedures set forth in Section 2.04(a).

ARTICLE III

TAX BENEFIT PAYMENTS

Section 3.01. Payments.

(a) Except as provided in Section 5.02, within five Business Days of a Tax Benefit Schedule with respect to a Taxable Year becoming final in accordance with Section 2.04(a), Brighthouse shall pay to MetLife the Tax Benefit for such Taxable Year determined pursuant to Section 3.01(b) (the “Tax Benefit Payment”). Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to a bank account previously designated by MetLife to Brighthouse or as otherwise agreed by Brighthouse and MetLife. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, estimated U.S. federal income tax payments.

(b) The “Tax Benefit” means an amount, not less than zero, equal to the Benefit Percentage of the sum of the Net Tax Benefit and the Interest Amount. The “Net Tax Benefit” with respect to a Taxable Year shall equal (i) the Taxable Entities’ Realized Tax Benefit, if any, required to be reflected on the Tax Benefit Schedule for such Taxable Year, plus (ii) for each prior Taxable Year, the excess, if any, of the Realized Tax Benefit reflected on an Amended Schedule over the Realized Tax Benefit reflected on the original Tax Benefit Schedule, minus (iii) for each prior Taxable Year, the excess, if any, of the Realized Tax Benefit reflected on the original Tax Benefit Schedule over the Realized Tax Benefit reflected on the Amended Schedule for such prior Taxable Year; provided, however, that to the extent any of the adjustments described in this Section 3.01(b)(ii) or (iii) was reflected in the calculation of the Tax Benefit Payment for any Taxable Year, such adjustments shall not be taken into account in determining the Net Tax Benefit for any subsequent Taxable Year; and provided, further, that for the avoidance of doubt, MetLife shall not be required to return any portion of any previously made Tax Benefit Payment other than pursuant to Section 3.03. The “Interest Amount” shall equal the interest on any Net Tax Benefit calculated at the Agreed Rate from the due date (without extensions) for filing the Brighthouse Return with respect to Taxes for the Taxable Year for which the Net Tax Benefit is being measured until the Payment Date.

 

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Section 3.02. No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement provide that the Benefit Percentage of the Taxable Entities’ Realized Tax Benefit for all Taxable Years in which a Brighthouse Tax Return is filed be paid to MetLife pursuant to this Agreement. Such amount shall be determined using a “with and without” methodology, and, for the avoidance of doubt, the calculation of the Realized Tax Benefit shall take into account any tax benefit or detriment to the Taxable Entities arising from the MRV Cell 2 Transfer as shown on Schedule A. Carryovers or carrybacks of any net operating loss or other Tax item shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of Tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax Asset includes a portion that is attributable to the Transaction Tax Assets and another portion that is not, such portions shall be considered to be used in the order determined using such “with and without” methodology. The provisions of this Agreement shall be construed in the appropriate manner so that such intentions are realized.

Section 3.03. No Excess Payments. In the event there has been a Determination establishing that the transaction described in (i) Ruling 9 or (ii) the tax opinion described in Section 2.02 does not result in adjustment to fair market value of the tax basis of the assets of MRV Cell 2 (as such term is used in Ruling 9) as of the date of such transaction and accordingly, a Taxable Entity is not entitled to a Realized Tax Benefit with respect to a Taxable Year then to the extent that, as a result of such Determination, the amount that Brighthouse has actually paid to MetLife under this Agreement as of the date of the Determination exceeds the total amount Brighthouse would be required to pay to MetLife for all prior periods and all future periods if the Tax Benefit Payments had always been computed in accordance with such Determination and using the Valuation Assumptions, then (i) MetLife shall return such excess to Brighthouse, with interest from the relevant date of payments computed at the Agreed Rate, and (ii) this Agreement shall terminate pursuant to the provisions of Section 4.01(a).

ARTICLE IV

TERMINATION

Section 4.01. Termination, Breach of Agreement, Change of Control.

(a) This Agreement shall terminate at the time that there is no potential for any future Tax Benefit Payments to be made to MetLife under this Agreement.

(b) Early Complete Termination. Except as provided in Section 5.02, Brighthouse may elect to terminate this Agreement (an “Early Complete Termination”) by (i) delivering to MetLife notice of its intention to exercise such right (“Early Termination Notice”) and (ii) paying to MetLife (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by Brighthouse and MetLife as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for the Taxable Year ending prior to, with or including the date of the Early Termination Notice. In the event of an Early Complete Termination, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions (substituting references to the date of such Early Termination Notice for references to the Early Termination Date in the definition of Valuation Assumptions).

 

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(c) Breach. In the event that Brighthouse breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due (as described below), failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and Brighthouse shall pay to MetLife (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by Brighthouse and MetLife as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for the Taxable Year ending prior to, with or including the date of a breach. Notwithstanding the foregoing in the event that Brighthouse breaches this Agreement, MetLife shall be entitled to elect to receive the amounts set forth in (1), (2) and (3) above or to seek specific performance of the terms hereof. In the event of a breach of a material obligation under this Agreement, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions. The parties agree that, subject to Section 5.02, the failure to make any payment pursuant to this Agreement within three months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement. Notwithstanding the foregoing, it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due, provided that in the event that payment is not made within three months of the date such payment is due, MetLife) shall be required to give written notice to Brighthouse that Brighthouse has breached its material obligations and so long as such payment is made within five Business Days of the delivery of such notice to Brighthouse, Brighthouse shall no longer be deemed to be in material breach of its obligations under this Agreement.

(d) Change of Control. In the event of a Change of Control, then all obligations hereunder shall be accelerated and Brighthouse shall pay to MetLife (1) the Early Termination Payment, (2) any Tax Benefit Payment agreed to by Brighthouse and MetLife as due and payable but unpaid as of the Early Termination Date and (3) any Tax Benefit Payment due for any Taxable Year ending prior to, with or including the effective date of a Change of Control. In the event of a Change of Control, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions.

(e) Divestiture Acceleration Payment. In the event of a Divestiture, Brighthouse shall pay to MetLife the Divestiture Acceleration Payment in respect of such Divestiture, which shall be calculated utilizing the Valuation Assumptions.

Section 4.02. Early Termination Schedule. In the event of a Change of Control or a Divestiture or if Brighthouse chooses to exercise its right of early termination, Brighthouse shall deliver to MetLife no later than sixty calendar days prior to such Change of Control or Divestiture, as applicable, and in the case of an Early Complete Termination, contemporaneously with the Early Termination Notice, a schedule (the “Early Termination Schedule”) showing in reasonable detail the information required or requested pursuant to the first sentence of Section 2.02 and the calculation of the Early Termination Payment or the Divestiture Acceleration Payment, respectively, utilizing the Valuation Assumptions. The Early Termination Schedule shall become final and binding on all parties unless MetLife, within thirty calendar days after receiving the Early Termination Schedule provides Brighthouse with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”). If the parties for any reason are unable to successfully resolve the issues raised in such notice within fifteen calendar days after receipt by Brighthouse of the Material Objection Notice, Brighthouse and MetLife shall employ the Reconciliation Procedures.

 

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Section 4.03. Payment upon Early Termination.

(a) Except as provided in Section 5.02, no later than the Early Termination Date, Brighthouse shall pay to MetLife the Early Termination Payment or Divestiture Acceleration Payment and any other payment required to be made pursuant to Sections 4.01(b), (c) and (d). Such payment shall be made by wire transfer of immediately available funds to a bank account designated by MetLife or as otherwise agreed by Brighthouse and MetLife.

(b) The “Early Termination Payment,” as of the Early Termination Date (other than an Early Termination Date arising under clause (iv) of the definition thereof) shall equal with respect to MetLife the present value, discounted at the Early Termination Rate as of such date, of all Tax Benefit Payments that would be required to be paid by Brighthouse to MetLife beginning from the Early Termination Date assuming the Valuation Assumptions are applied, provided that in the event of a Change of Control, the Early Termination Payment shall be calculated without giving effect to any limitation on the use of the Transaction Tax Assets resulting from the Change of Control. For purposes of calculating the present value pursuant to this Section 4.03(b) of all Tax Benefit Payments that would be required to be paid, it shall be assumed that absent the Early Termination Event all Tax Benefit Payments would be paid on the due date (without extensions) for filing the Brighthouse Return with respect to Taxes for each Taxable Year. The computation of the Early Termination Payment is subject to the Reconciliation Procedures.

(c) The “Divestiture Acceleration Payment,” as of the date of any Divestiture, shall equal with respect to MetLife the present value, discounted at the Early Termination Rate as of such date, of the Tax Benefit Payments resulting solely from the Transferred Tax Assets that would be required to be paid by Brighthouse to MetLife beginning from the date of such Divestiture assuming the Valuation Assumptions are applied, provided that the Divestiture Acceleration Payment shall be calculated without giving effect to any limitation on the use of the Transferred Tax Assets resulting from the Divesture. For purposes of calculating the present value pursuant to this Section 4.03(c) of all Tax Benefit Payments that would be required to be paid, it shall be assumed that absent the Divestiture all Tax Benefit Payments would be paid on the due date (without extensions) for filing the Brighthouse Return with respect to Taxes for each Taxable Year. The computation of the Divestiture Acceleration Payment is subject to the Reconciliation Procedures.

 

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ARTICLE V

LATE PAYMENTS, ETC.

Section 5.01. Late Payments by Brighthouse. The amount of all or any portion of any ITR Payment not made to MetLife when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such ITR Payment was due and payable.

Section 5.02. Compliance with Indebtedness and Applicable Law. Notwithstanding anything to the contrary provided herein, if, at the time any amounts become due and payable hereunder, (a) Brighthouse is not permitted, pursuant to the terms of its outstanding indebtedness, to pay such amounts, (b) (i) Brighthouse does not have the cash on hand to pay such amounts or payment of such amounts would give rise to a material adverse effect, as certified by Brighthouse’s Chief Financial Officer, and (ii) no Subsidiary of Brighthouse is permitted, pursuant to the terms of its outstanding indebtedness or other applicable law, to pay dividends to Brighthouse to allow it to pay such amounts, or (c) payments of such amounts would violate applicable law then, in each case, Brighthouse shall, by notice to MetLife, be permitted to defer the payment of such amounts until the condition described in clause (a), (b) or (c) is no longer applicable, in which case such amounts (together with accrued and unpaid interest thereon as described in the immediately following sentence) shall become due and payable immediately. If Brighthouse defers the payment of any such amounts pursuant to the foregoing sentence, such amounts shall accrue interest at the Agreed Rate per annum, from the date that such amounts originally became due and owing pursuant to the terms hereof to the date that such amounts were paid. Brighthouse agrees to take commercially reasonable actions to cause its direct and indirect Subsidiaries to pay dividends (including, to the extent commercially reasonable, access any revolving credit facility or other source of liquidity to facilitate the payment of such dividends), to the extent consistent with the terms of their outstanding indebtedness and any applicable law, to the extent necessary to make payments hereunder.

ARTICLE VI

CONSISTENCY; COOPERATION

Section 6.01. MetLife’s Participation in Brighthouse Tax Matters. Except as otherwise provided herein, and subject to the Distribution Tax Separation Agreement, Brighthouse shall have full responsibility for, and sole discretion over, all Tax matters concerning Brighthouse and each Taxable Entity including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes, subject to a requirement that Brighthouse act in good faith in connection with its control of any matter which is reasonably expected to affect MetLife’s rights and obligations under this Agreement. Notwithstanding the foregoing, Brighthouse shall promptly notify MetLife of, and keep MetLife reasonably informed with respect to, the portion of any audit of Brighthouse or any Taxable Entity by a Taxing Authority the outcome of which is reasonably expected to affect MetLife’s rights and obligations under this Agreement, and shall give MetLife reasonable opportunity to provide information and participate in (but, for the avoidance of doubt, not to control) the applicable portion of such audit.

 

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Section 6.02. Consistency. Except upon the written advice of an Advisory Firm, Brighthouse and MetLife agree to report and cause to be reported for all purposes, including federal, state, local and foreign Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Tax Benefit Payment) in a manner consistent with that specified by Brighthouse in any Schedule required to be provided by or on behalf of Brighthouse or any Taxable Entity under this Agreement and agreed by MetLife. Any dispute concerning such advice shall be subject to the Reconciliation Procedures. In the event the Advisory Firm is replaced with another firm acceptable to Brighthouse and MetLife pursuant to the definition of Advisory Firm, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with those used by the previous Advisory Firm, unless otherwise required by law or Brighthouse and MetLife agree to the use of other procedures and methodologies.

Section 6.03. Cooperation. Each of Brighthouse and MetLife shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making or approving any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the requesting party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the requesting party shall reimburse the other party for any reasonable third-party costs and expenses incurred pursuant to this Section 6.03.

ARTICLE VII

MISCELLANEOUS

Section 7.01. Notices.

(a) All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender’s fax machine if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

If to Brighthouse, to:

Brighthouse Services LLC

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attn: SVP Tax

 

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Copy to:

Brighthouse Services LLC

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attn: General Counsel

with a copy to (which shall not constitute notice):

Sidley Austin LLP

One South Dearborn

Chicago, IL 60603

Attn:    Tracy Williams

Fax:     (312) 853-7036

If to MetLife, to:

MetLife, Inc.

200 Park Avenue

New York, NY 10166

Attn:    SVP Tax Director

Fax:     (212) 578-6542

MetLife, Inc.

200 Park Avenue

New York, NY 10166

Attention: General Counsel

with a copy to (which shall not constitute notice):

Willkie Farr & Gallagher LLP    

787 Seventh Avenue

New York, NY 10019

Attn:    Christopher J. Peters

Fax:     (212) 728-9868

Any party may change its address or fax number by giving the other party written notice of its new address or fax number in the manner set forth above.

Section 7.02. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

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Section 7.03. Entire Agreement; Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its respective successors and permitted assigns. Other than as provided in the preceding sentence, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

Section 7.04. Assignability. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise except as described herein. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, any party and their respective successors and assigns. Notwithstanding the foregoing, either party may assign this Agreement without consent in connection with (a) a merger transaction in which such party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such party’s assets, or (b) the sale of all or substantially all of such party’s assets; provided, however, that the assignee expressly assumes in writing all of the obligations of the assigning party under this Agreement, and the assigning party provides written notice and evidence of such assignment and assumption to the non-assigning party. No assignment permitted by this Section 7.04 shall release the assigning party from liability for the full performance of its obligations under this Agreement.

Section 7.05. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

Section 7.06. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

Section 7.07. Amendments; Waivers.

(a) No provision of this Agreement may be amended unless such amendment is approved in writing by Brighthouse and MetLife. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

(b) All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. Brighthouse shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Brighthouse, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Brighthouse would be required to perform if no such succession had taken place.

Section 7.08. Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

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Section 7.09. Resolution of Disputes.

(a) Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on the selection of an arbitrator within thirty calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

(b) Notwithstanding the provisions of paragraph (a), Brighthouse may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), MetLife (i) expressly consents to the application of paragraph (c) of this Section 7.09 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints Brighthouse as its agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise MetLife of any such service of process, shall be deemed in every respect effective service of process upon MetLife in any such action or proceeding.

(c) (i) METLIFE HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.09, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

(ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c)(i) of this Section 7.09 and such parties agree not to plead or claim the same.

Section 7.10. Reconciliation. In the event that Brighthouse and MetLife are unable to resolve a disagreement with respect to the matters governed by Section 2.04, Section 4.02 and Section 6.02 within the relevant period designated in this Agreement (or the amount of an Early Termination Payment in the case of a breach to which Section 4.01(c) applies) (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with Brighthouse or MetLife or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement is due or any Tax Return reflecting the subject of a disagreement is due, such payment shall be made on the date prescribed by this Agreement and such Tax Return may be filed as prepared by Brighthouse or the relevant Taxable Entity, subject to adjustment or amendment upon resolution. The costs and expenses related to the engagement of such Expert or amending any Tax Return shall be borne by Brighthouse, except as provided in the next sentence. Each of Brighthouse and MetLife shall bear their own costs and expenses of such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.10 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.10 shall be binding on Brighthouse and MetLife and may be entered and enforced in any court having jurisdiction.

 

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Section 7.11. Treatment of Payments. Except to the extent otherwise required by applicable Tax law, Brighthouse and MetLife agree that (i) any payment payable pursuant to this Agreement shall be treated as if it occurred immediately prior to the Distribution and shall be treated as being distributed pursuant to the plan of reorganization that includes the Distribution and (ii) shall not be subject to any U.S. federal income tax withholdings under applicable Tax law as of the date hereof. In the event of a change in applicable Tax law that results in a non-creditable withholding tax, the parties agree to renegotiate the terms of this Agreement in good faith to minimize the economic effect of any withholding tax.

Section 7.12. Affiliated Corporations; Admission of Brighthouse into a Consolidated Group; Transfers of Corporate Assets.

(a) If Brighthouse is or becomes a parent or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code (other than if Brighthouse becomes a member of such a group as a result of Change of Control, in which case the provisions of Article IV shall control), then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole and (ii) Tax Benefit Payments shall be computed with reference to the consolidated taxable income of the group as a whole.

(b) If any Person the income of which is included in the income of Brighthouse’s affiliated or consolidated group transfers one or more assets to a corporation or any Person treated as such for Tax purposes with which such entity does not file a consolidated tax return pursuant to Section 1501 et seq. of the Code, for purposes of calculating the amount of any Tax Benefit Payment (e.g., calculating the gross income of Brighthouse’s affiliated or consolidated group and determining the Realized Tax Benefit) due hereunder, such Person shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution. The consideration deemed to be received by such entity shall be determined as if such transfer occurred on an arm’s length basis with an unrelated third party.

 

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Section 7.13. Confidentiality.

(a) MetLife and each of its assignees acknowledges and agrees that the information of Brighthouse is confidential and, except in the course of performing any duties as necessary for Brighthouse and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, shall keep and retain in the strictest confidence and not disclose to any Person all confidential matters of Brighthouse acquired pursuant to this Agreement. This Section 7.13 shall not apply to (i) any information that has been made publicly available by Brighthouse or any of its Affiliates becomes public knowledge (except as a result of an act of MetLife in violation of this Agreement) or is generally known to the business community; and (ii) the disclosure of information to the extent necessary for MetLife or any of its Affiliates to prepare and file Tax returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns.

(b) If MetLife or any of its assignees commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.13, Brighthouse shall have the right and remedy to have the provisions of this Section 7.13 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Brighthouse or any of its Subsidiaries and the accounts and funds managed by Brighthouse and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

Section 7.14. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

[Signatures pages follow]

 

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IN WITNESS WHEREOF, Brighthouse and MetLife have duly executed this Agreement as of the date first written above.

 

METLIFE, INC.

By:

 

 

 

Name:

 

Title:

BRIGHTHOUSE FINANCIAL, INC.

By:

 

 

 

Name:

 

Title:

 

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EX-10.6

Exhibit 10.6

FORM OF

TAX SEPARATION AGREEMENT

by and among

METLIFE, INC.

AND ITS AFFILIATES

and

BRIGHTHOUSE FINANCIAL, INC.

AND ITS AFFILIATES


FORM OF

TAX SEPARATION AGREEMENT

This Tax Separation Agreement (the “Agreement”) is entered into as of the [●] day of [●], [2017], between MetLife, Inc. (“MetLife”), a Delaware corporation, by and on behalf of itself and each Affiliate of MetLife, and Brighthouse Financial, Inc. (“Brighthouse” and, together with MetLife, the “Parties”), a Delaware corporation, by and on behalf of itself and each Affiliate of Brighthouse.

R E C I T A L S:

WHEREAS, MetLife’s board of directors has determined that it is appropriate and advisable to: (i) separate the Brighthouse Group from MetLife’s remaining businesses (the “Separation”), which will include the transfer of Brighthouse Holdings, LLC (“HoldCo”) to Brighthouse (the “HoldCo Contribution”); and (ii) following the Separation, make a distribution, on a pro rata basis, to holders of common shares of MetLife (“MetLife Common Stock”) of at least 80.1% of the outstanding shares of common stock of Brighthouse owned by MetLife (the “Distribution”, and the date of such Distribution, the “Distribution Date”);

WHEREAS, as of the Distribution Date, the existing Agreement to Apportion Consolidated Federal Income Tax Liability and Benefits of Consolidated Returns, dated as of June 24, 1986 that is in effect with respect to the U.S. federal income tax consolidated group of which MetLife is the parent (the “MetLife Tax Allocation Agreement”) is being terminated for all tax periods with respect to the Brighthouse Group and no member of the Brighthouse Group shall have any liability or rights thereunder following such termination;

WHEREAS, prior to the HoldCo Contribution and as part of the Separation, the MRV Cell 2 Contribution was effected;

WHEREAS, as of the date hereof, MetLife is the common parent of an affiliated group of domestic corporations, including Brighthouse, that has elected to file consolidated U.S. federal Income Tax Returns and, as a result of the Distribution, neither Brighthouse nor any of its Affiliates will be a member of such group after the close of the Distribution Date; and

WHEREAS, in contemplation of the Distribution, MetLife and Brighthouse desire to set forth their agreement on the rights and obligations of MetLife and Brighthouse and their respective Affiliates with respect to the responsibility, handling and allocation of federal, state, local, and non-U.S. Taxes, and various other Tax matters;

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained in this Agreement, MetLife and Brighthouse (and their respective Affiliates) hereby covenant and agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement (including the recitals hereof), the following terms have the following meaning, and capitalized terms used in this Agreement but not otherwise defined herein shall have the meanings assigned to them in the Master Separation Agreement.

 

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Active Trade or Business” means the business that is “actively conducted” (as defined in Section 355(b)(2) of the Code and the regulations thereunder) by the “separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) with respect to Brighthouse or MetLife, as applicable, as conducted immediately prior to the Distribution.

Adjustment Request” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (a) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (b) any claim for equitable recoupment or other offset, and (c) any claim for refund or credit of Taxes previously paid.

Affiliate” means any corporation, partnership, limited liability company, or other entity directly or indirectly Controlled by the entity in question.

Agreement” has the meaning set forth in the Preamble.

BRCD” means Brighthouse Reinsurance Company of Delaware.

Brighthouse” has the meaning set forth in the Preamble.

Brighthouse Capital Stock” means all classes or series of capital stock of Brighthouse, including (a) the Brighthouse Common Stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock in Brighthouse for U.S. federal income tax purposes.

Brighthouse Common Stock” means the ordinary voting interests in Brighthouse.

Brighthouse Group” means Brighthouse and all Affiliates of Brighthouse (and each such entity’s predecessors and successors), as determined immediately after the Distribution. For the avoidance of doubt, a fiscally transparent entity’s items of income, gain, loss or deduction is treated as attributable to such entity’s owners or shareholders.

Brighthouse Separate Return” means any Tax Return of or including any member of the Brighthouse Group (including any consolidated, combined or unitary return) that is not a Joint Return.

Capital Stock” means the Brighthouse Capital Stock or the MetLife Capital Stock, as applicable.

Code” means the Internal Revenue Code of 1986, as amended.

Contributed Property” means the following property contributed by MetLife to HoldCo as part of the Separation: (i) 100% of the outstanding shares of common stock of MLUS, (ii) 100% of the outstanding shares of common stock of New England Life Insurance Company, (iii) 100% of the membership interests in Brighthouse Securities LLC, (iv) 100% of the membership interests in Brighthouse Services LLC, and (v) 100% of the interests in MetLife Advisers LLC.

Control” means the ownership of stock or other securities possessing at least 50 percent of the total combined voting power of all classes of securities entitled to vote.

Debt-for-Equity Exchange” means the distribution by MetLife of Retained Stock to MetLife creditors, in any case no later than five years after the Distribution.

Distribution” has the meaning set forth in the Recitals.

Distribution Date” has the meaning set forth in the Recitals.

 

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Employee Matters Agreement” means the Employee Matters Agreement entered into by and between MetLife and Brighthouse on the date hereof, as the same may be amended.

Employment Taxes” means any Tax the liability or responsibility for is allocated pursuant to the Employee Matters Agreement.

Fifty-Percent or Greater Interest” has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.

Final Determination” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a state, local, or non-U.S. taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a state, local, or non-U.S. taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.

FMLI Contribution” means the transfer by MetLife of First MetLife Investors Insurance Company to MLUS.

HoldCo” has the meaning set forth in the Recitals.

HoldCo Common Stock” means the ordinary voting interests in HoldCo.

HoldCo Contribution” has the meaning set forth in the Recitals.

HoldCo Preferred Stock” means the non-voting preferred interests in HoldCo.

Income Tax” means any Tax which is based upon, measured by, or calculated with respect to income or net worth and any other franchise or similar Taxes.

Income Tax Return” means any Tax Return relating to Income Taxes.

Indemnifying Party” means a Party that has an obligation to make an Indemnity Payment.

Indemnitee” means a Party that is entitled to receive an Indemnity Payment.

Indemnity Payment” means an indemnity payment contemplated by this Agreement..

Intended Tax Treatment” means (i) the FMLI Contribution, HoldCo Contribution, Distribution, Subsequent Distributions (other than Subsequent Distributions effected through sales to third parties), and Debt-for-Equity Exchanges effected as part of the Separation will qualify for Tax-Free Status; (ii) the Retail Contribution, taken together with the Subsequent Sale, will be treated as a fully taxable transfer of the Contributed Property under Section 1001; and (iii) the MRV Cell 2 Contribution will be treated as a fully taxable transfer of the assets of MRV Cell 2 in an assumption reinsurance transaction.

IRS” means the United States Internal Revenue Service.

 

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IRS Ruling” means the private letter ruling issued by the IRS to MetLife in response to the request for ruling filed by MetLife on September 20, 2016 (and supplemental submissions related thereto) in connection with the Transactions (including any supplemental rulings).

Joint Return” means any Tax Return that actually includes, by election or otherwise, one or more members of the MetLife Group together with one or more members of the Brighthouse Group.

KPMG Opinion” means the written opinion on the U.S. federal income taxation consequences of certain aspects of the Transactions provided by KPMG LLP to the MetLife Group, dated as of [●].

Master Separation Agreement” means the Master Separation Agreement entered into by and between MetLife and Brighthouse on the date hereof, as the same may be amended.

MetLife” has the meaning set forth in the Preamble.

MetLife Affiliated Group” means the affiliated group (as that term is defined in Section 1504 of the Code and the regulations thereunder) of which MetLife is the common parent.

MetLife Capital Stock” means all classes or series of capital stock of MetLife, including (a) the MetLife Common Stock, (b) all options, warrants and other rights to acquire such capital stock and (c) all instruments properly treated as stock in MetLife for U.S. federal income tax purposes.

MetLife Common Stock” has the meaning set forth in the Recitals.

MetLife Federal Consolidated Income Tax Return” means any United States federal Income Tax Return for the MetLife Affiliated Group.

MetLife Group” means MetLife and all Affiliates of MetLife (and each such entity’s predecessors or successors), excluding any entity that is a member of the Brighthouse Group. For the avoidance of doubt, a fiscally transparent entity’s items of income, gain, loss or deduction is treated as attributable to such entity’s owners or shareholders.

MetLife Ireland” means MetLife Ireland Treasury d.a.c.

MetLife Separate Return” means any Tax Return of or including any member of the MetLife Group (including any consolidated, combined or unitary return) that is not a Joint Return.

MetLife Tax Allocation Agreement” has the meaning set forth in the Recitals.

MLUS” means MetLife Insurance Company USA.

MRV” means MetLife Reinsurance Company of Vermont.

MRV Cell 2” means the Protected Cell No. 2 of MRV.

MRV Cell 2 Contribution” means, prior to the HoldCo Contribution and as part of the Separation, MRV’s (i) formation of New MRV; (ii) entering into a binding commitment to sell the New MRV Preferred Stock to MetLife Ireland; (iii) transfer of MRV Cell 2 to New MRV in exchange for the voting common stock of New MRV and New MRV Preferred Stock; (iv) conversion of MRV Cell 2 into a stand-alone captive insurance company under Vermont law and the merger of this entity with and into New MRV; (v) sale of all of the New MRV Preferred Stock to MetLife Ireland and (vi) merger of New MRV with and into BRCD.

New MRV” means MetLife Reinsurance Company of Vermont II, a Vermont corporation licensed as a sponsored captive insurance company.

 

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New MRV Preferred Stock” means the non-voting preferred interests in New MRV.

Non-Income Tax” means any Tax that is not an Income Tax.

Notified Action” has the meaning set forth in Section 4.04(a).

Officer’s Certificate” means each of the Officer’s Certificate of MetLife, Inc., dated as of [●], and the Officer’s Certificate of Brighthouse Financial, Inc., dated as of [●], respectively, provided to KPMG LLP.

Other Tax Ruling” means each ruling (other than the IRS Ruling) issued by a Tax Authority pursuant to a ruling request filed by or on behalf of the MetLife Group with respect to the Transactions (including any supplemental rulings).

Parties” has the meaning set forth in the Preamble.

Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal income tax purposes.

Post-Distribution Tax Opinion” means a tax opinion of a Tax Advisor, which Tax Advisor is reasonably acceptable to MetLife, on which MetLife may rely to the effect that a transaction will not affect the applicable Intended Tax Treatment. Any such opinion must be consistent with the assumption that the Transactions would have qualified for the applicable Intended Tax Treatment if the transaction in question did not occur.

Post-Distribution Tax Period” means any Tax Period beginning after the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period beginning the day after the Distribution Date.

Pre-Distribution Tax Period” means any Tax Period ending on or before the Distribution Date, and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Distribution Date.

Property Tax” means any real, personal and intangible ad valorem property Tax imposed by any Tax Authority, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

Proposed Acquisition Transaction” means, with respect to a Party, a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), as a result of which a Party would merge or consolidate with any other Person or as a result of which one or more Persons would (directly or indirectly) acquire, or have the right to acquire, from the Party and/or one or more holders of outstanding shares of such Party’s Capital Stock, a number of shares of such Capital Stock that would, when combined with any other changes in ownership of such Party’s Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 45% or more of (a) the value of all outstanding shares of stock of the Party as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (b) the total combined voting power of all outstanding shares of voting stock of the Party as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (x) the adoption by the Party of a shareholder rights plan or (y) issuances by the Party that satisfy Safe Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.

 

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Records” has the meaning set forth in Section 5.01(a).

Refund Recipient” has the meaning set forth in Section 2.08.

Representation Letters” means the representation letters and any other materials (including, without limitation, a Ruling Request and any related supplemental submissions to the IRS) delivered or deliverable by MetLife, Brighthouse and others in connection with the rendering by KPMG LLP [or any other Tax Advisor, and/or the issuance by the IRS or any other Tax Authority, of the Tax Opinions/Rulings.]2

Retail Contribution” means MetLife’s contribution of the Contributed Property to HoldCo in exchange for HoldCo Common Stock and HoldCo Preferred Stock.

Retained Stock” means the outstanding Brighthouse Common Stock, up to 19.9%, that MetLife may retain after the Distribution.

Ruling Request” means any letter filed by MetLife with the IRS or any other Tax Authority requesting a ruling (including the IRS Ruling and the Other Tax Rulings) regarding certain Tax consequences of the Transactions (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter.

Rulings” means, collectively, the IRS Ruling and the Other Tax Rulings and “Ruling” means any one of them.

Separation” has the meaning set forth in the Recitals.

Straddle Period” means any Tax Period that begins on or before and ends after the Distribution Date.

Subsequent Distributions” means MetLife’s distributions of Retained Stock to MetLife shareholders or creditors or effected by way of sales to third parties, in any case no later than five years after the Distribution.

Subsequent Sale” means, after the date of the Retail Contribution, MetLife’s sale of the HoldCo Preferred Stock to [●] pursuant to a binding commitment.

Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, value added, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, alternative minimum, guaranty fund assessments and similar contributions or payments to a solvency or insolvency fund or pool, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), imposed by any governmental entity or political subdivision thereof, and any interest, penalty, additions to tax, or additional amounts in respect of the foregoing.

Tax Advisor” means any law or accounting firm that is nationally recognized as being expert in tax matters.

Tax Attribute” means a net operating loss, net capital loss, overall foreign loss, unused investment credit, unused foreign tax credit, excess charitable contribution, alternative minimum tax credit, general business credit, research and development credit or any other Tax Item that could reduce a Tax or create a Tax benefit.

Tax Authority” means, with respect to any Tax, the governmental authority or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

 

2  [Note to draft: Additional rep letters to be listed individually].

 

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Tax Benefit” means, with respect to a Tax Period, the amount by which the cash Tax liability of an entity (or of the consolidated or combined group of which it is a member) is reduced solely as a result of a Tax Item, or the amount of an actual Tax refund that is generated solely as a result of such Tax Item (plus any related interest received from any Tax Authority), in either case, by comparing the cash Tax liability or actual Tax refund on the applicable Tax Return that would arise with and without the Tax Item potentially giving rise to the Tax Benefit.

Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of determining or redetermining any Tax (including any administrative or judicial review of any claim for refund).

Tax-Free Status” means the qualification of (I) the Separation and the Distribution (along with the Subsequent Distributions (other than Subsequent Distributions effected through sales to third parties) and Debt-for-Equity Exchanges), taken together, (a) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code, (c) a transaction in which MetLife, Brighthouse and the shareholders of MetLife recognize no income or gain for U.S. federal income tax purposes pursuant to Sections 355, 361, and 1032 of the Code, other than, (x) in the case of MetLife and Brighthouse, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code, (y) in the case of MetLife, Subsequent Distributions effected through sales of Retained Stock to third parties, and (z) in the case of shareholders of MetLife, any receipt of cash in lieu of fractional shares, and (II) any other transaction described in the Tax Opinions/Rulings in accordance with the treatment set forth therein, other than the Retail Contribution, taken together with the Subsequent Sale, and the MRV Cell 2 Contribution.

Tax Item” means any item of income, gain, loss, deduction, credit, recapture of credit, or any other item (including the basis or adjusted basis of property) which increases or decreases Taxes paid or payable in any taxable period.

Tax Law” means the law of any governmental entity or political subdivision thereof relating to any Tax.

Tax Opinions” means (i) the KPMG Opinion and [(ii) any other written opinions on the U.S. state, local, and non-U.S. tax consequences of certain aspects of the Transactions provided by any Tax Advisors to any member of the MetLife Group, in either case, requested prior to the Distribution.]

Tax Opinions/Rulings” means the Tax Opinions and/or the Rulings deliverable to any member of the MetLife Group in connection with the Transactions.

Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

Tax Receivables Agreement” means that Tax Receivables Agreement entered into between MetLife and Brighthouse on the date hereof, as the same may be amended.

Tax-Related Losses” means (a) all Taxes (including interest and penalties thereon) imposed pursuant to any settlement, Final Determination, judgment or otherwise; (b) all accounting, legal and other professional fees, and court costs, incurred in connection with such Taxes (excluding, however, any such fees addressed in the Master Litigation Agreement); and (c) an amount equal to (i) any reduced payments by Brighthouse to MetLife under the Tax Receivables Agreement as a result of an act or failure to act of Brighthouse which results in the description in clause (iii) of the definition of Intended Tax Treatment to be untrue, less (ii) any net tax benefit to MetLife resulting from such act or failure to act of Brighthouse; in each case, resulting from the failure of the Transactions to have the tax treatment described in the Tax Opinions/Rulings.

Tax Return” means any report of Tax due, any claims for refund of Tax paid, any information return with respect to Tax, any election made with respect to Tax, or any other similar report, statement, declaration, or document required to be filed under the Code or other Law with respect to Tax, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing for any taxpayer or consolidated, combined, or unitary group of taxpayers.

 

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Tax Return Preparer” means (i) with respect to any Tax Return that MetLife is responsible for preparing under Section 3.01(a), MetLife, and (ii) with respect to any Tax Return that Brighthouse is responsible for preparing under Section 3.01(b), Brighthouse.

Transaction” means the MRV Cell 2 Contribution, the Retail Contribution, together with the Subsequent Sale, the HoldCo Contribution, the Distribution, the Subsequent Distributions and the Debt-for-Equity Exchanges.

Transaction Tax Contest” means a Tax Contest with the purpose or effect of determining or redetermining Taxes that could give rise to Tax-Related Losses.

Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

ARTICLE II

RESPONSIBILITY FOR TAX

Section 2.01 General Rule.

(a) MetLife Liability. MetLife shall be liable for, and shall indemnify and hold harmless the Brighthouse Group from and against any liability for, Taxes which are allocated to MetLife under this Article II.

(b) Brighthouse Liability. Brighthouse shall be liable for, and shall indemnify and hold harmless the MetLife Group from and against any liability for, Taxes which are allocated to Brighthouse under this Article II.

Section 2.02 Income Taxes. All Income Taxes of the MetLife Group and Brighthouse Group shall be allocated as follows:

(a) Income Taxes.

(i) Joint Returns. Subject to Section 2.02(b), MetLife shall be responsible for any and all Income Taxes (including estimated Income Taxes) shown as due and owing on any originally filed Joint Return for any Tax Period beginning on or before the Distribution Date (including any originally filed Joint Return for a Straddle Period).

(ii) MetLife Separate Returns. MetLife shall be responsible for any and all Income Taxes (including estimated Income Taxes) shown as due and owing on any MetLife Separate Return for any Tax Period beginning on or before the Distribution Date (including any MetLife Separate Return for a Straddle Period).

(iii) Brighthouse Separate Returns. Brighthouse shall be responsible for any and all Income Taxes (including estimated Income Taxes) shown as due and owing on any Brighthouse Separate Return for any Tax Period beginning on or before the Distribution Date (including any Brighthouse Separate Return for a Straddle Period).

(b) Pre-Distribution Income Tax Payments on Joint Returns.

(i) With respect to any Pre-Distribution Tax Period, the members of the Brighthouse Group and the members of the MetLife Group shall be liable for (including any benefit of) their share of Taxes on a Joint Return with respect to that Pre-Distribution Tax Period (including, but not limited to, deferred intercompany items of the respective members of the Brighthouse Group and the MetLife Group triggered as a result of the Distribution) as determined under the MetLife Tax Allocation Agreement, calculated as it was in effect for such Pre-Distribution Tax Period, subject to modifications under this Section 2.02(b).

 

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(ii) Notwithstanding anything to the contrary in the MetLife Tax Allocation Agreement, at least 20 days prior to the relevant payment, MetLife shall deliver to Brighthouse a schedule, and any workpapers reasonably necessary to evaluate the accuracy of such schedule, setting forth in reasonable detail a calculation of any “Tax Allocation Payments.” For purposes of this Section 2.02(b), “Tax Allocation Payments” shall mean any amounts required to be paid by or to any member of the Brighthouse Group, on the one hand, and MetLife, on the other, under the MetLife Tax Allocation Agreement (or amounts that would have been required to be paid, but for termination of the MetLife Tax Allocation Agreement with respect to members of the Brighthouse Group) in respect of (i) estimated tax payments in respect of the portion of the 2017 tax year in which members of the Brighthouse Group were members of the MetLife Affiliated Group and (ii) any payments (whether to or from the Brighthouse Group) with respect to the 2016 tax year and the portion of the 2017 tax year in which such members were members of the MetLife Affiliated Group. Such calculation shall be computed and such schedules and other materials shall be prepared in a manner consistent with the past practice of the MetLife Affiliated Group.

(iii) Brighthouse shall provide MetLife with notice of any disagreement with the schedules delivered pursuant to Section 2.02(b)(ii) within fifteen (15) days of receipt of such schedules, and MetLife and Brighthouse shall reasonably cooperate to resolve any disagreements over such schedules; provided, however, that a pending disagreement shall not relieve a Party of its obligation to make timely payment pursuant to Section 2.02(b)(iv). In the event the Parties cannot agree the dispute shall be resolved pursuant to the provisions of Section 5.05.

(iv) All payments subject to this Section 2.02(b) shall be timely paid, as if the MetLife Tax Allocation Agreement were not terminated with respect to members of the Brighthouse Group. If a payment is made during the pendency of a disagreement described in Section 2.02(b)(iii), the Parties shall make any further payments necessary to reflect the ultimate resolution of such disagreement within five (5) business days of such resolution.

(c) Post-Distribution Income Taxes. MetLife shall be responsible for any and all Income Taxes imposed on the MetLife Group for any Tax Period beginning after the Distribution Date (whether or not such Income Taxes are due and owing on any originally filed or amended Income Tax Return or as a result of any Final Determination or other adjustment made by a Tax Authority). Brighthouse shall be responsible for any and all Income Taxes imposed on the Brighthouse Group for any Tax Period beginning after the Distribution Date (whether or not such Income Taxes are due and owing on any originally filed or amended Income Tax Return or as a result of any Final Determination or other adjustment made by a Tax Authority).

(d) Termination of MetLife Tax Allocation Agreement. For the avoidance of doubt, as of the Distribution Date, (i) the MetLife Tax Allocation Agreement shall be terminated for all tax periods with respect to the Brighthouse Group; (ii) no member of the Brighthouse Group shall have any liability or rights thereunder following such termination; and (iii) the members of the Brighthouse Group and the MetLife Group shall be liable for Income Tax with respect to Pre-Distribution Tax Periods as set forth in this Section 2.02.

Section 2.03 Non-Income Taxes. Except as provided in Sections 2.04 and 2.05, (i) MetLife shall be responsible for any and all Non-Income Taxes imposed on any member of the MetLife Group for all Pre-Distribution Tax Periods and Post-Distribution Tax Periods, and (ii) Brighthouse shall be responsible for any and all Non-Income Taxes imposed on any member of the Brighthouse Group for Pre-Distribution Tax Periods and Post-Distribution Tax Periods.

Section 2.04 Scheduled Tax Allocations. Notwithstanding anything to the contrary herein, all Taxes arising out of the matters described in Schedule 2.04 shall be allocated to MetLife.

 

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Section 2.05 Employment Taxes; Breaches of Covenants.

(a) The Parties acknowledge and agree that this Agreement, including Article II, shall not apply with respect to any and all Employment Taxes, for which the Employee Matters Agreement shall govern.

(b) Brighthouse shall be responsible for any and all Taxes resulting from a breach by any member of the Brighthouse Group of any covenant in this Agreement including exhibits.

(c) MetLife shall be responsible for any and all Taxes resulting from a breach by any member of the MetLife Group of any covenant in this Agreement including exhibits.

Section 2.06 Allocation of Prior Period Adjustments. Within 20 days of filing an amended Joint Return or a Final Determination in respect of a Joint Return for a Pre-Distribution Tax Period, MetLife shall deliver to Brighthouse a schedule, and any workpapers reasonably necessary to evaluate the accuracy of such schedule, setting forth in reasonable detail a calculation of amounts required to be paid by or to any member of the Brighthouse Group, on the one hand, and MetLife, on the other, as if the MetLife Tax Allocation Agreement were still in effect with respect to such Pre-Distribution Tax Period, and prepared in accordance with MetLife’s prior practice with respect to such Pre-Distribution Tax Period. Brighthouse shall provide MetLife with notice of any disagreement with the schedules delivered pursuant to this Section 2.06 within fifteen (15) days of receipt of such schedules, and MetLife and Brighthouse shall reasonably cooperate to resolve any disagreements over such schedules. In the event the Parties cannot agree, the dispute shall be resolved pursuant to the provisions of Section 5.05. Upon finalization of any schedule delivered pursuant to this Section 2.06, MetLife or the relevant member of the Brighthouse Group, as the case may be, shall make payments to the other in accordance with the finalized schedule.

Section 2.07 Proration of Taxes for Straddle Periods.

(a) For U.S. federal income tax purposes, the Parties acknowledge and agree that the Tax Period of each member of the Brighthouse Group that joined in the filing of the MetLife Federal Consolidated Income Tax Return will close as of the end of the Distribution Date. MetLife and Brighthouse shall take all commercially reasonable actions necessary or appropriate to close the taxable year of each member of the Brighthouse Group for all other U.S. federal Tax purposes and any material state Tax purposes as of the end of the Distribution Date to the extent permitted by applicable Law; provided that this Section 2.07(a) shall not be construed to require any member of the MetLife Group to change any of its Tax Periods.

(b) For any Straddle Period, Taxes for the Pre-Distribution Tax Period shall be computed (i) in the case of Taxes imposed on a periodic basis (such as Property Taxes), on a daily pro rata basis and (ii) in the case of other Taxes generally, (A) if commercially practicable, as if the Tax Period ended as of the close of business on the Distribution Date and, (B) if such other Taxes are attributable to the ownership of any equity interest in a partnership, other “flowthrough” entity or “controlled foreign corporation” (within the meaning of Section 957(a) of the Code or any comparable U.S. state or local or non-U.S. Tax Law), as if the Tax Period of that entity ended as of the close of business on the Distribution Date (whether or not such Taxes arise in a Straddle Period of the applicable owner) and (C) otherwise on a daily pro rata basis.

Section 2.08 Tax Refunds.

Subject to Section 2.09, if MetLife, Brighthouse or any of their respective Affiliates receives any refund of any Taxes for which the other Party is allocated under this Article II (a “Refund Recipient”), such Refund Recipient shall pay to the other Party the entire amount of the refund (including interest received from the relevant Tax Authority, but net of any Taxes imposed with respect to such refund and any other reasonable costs) within 30 business days of receipt thereof; provided, however, that the other Party, upon the request of such Refund Recipient, shall repay the amount paid to the other Party (plus any penalties, interest or other charges imposed by the relevant Tax Authority) in the event such Refund Recipient is required by applicable law to repay such refund. In the event a Party would be a Refund Recipient but for the fact it elected to apply a refund to which it would otherwise have been entitled against a Tax liability arising in a subsequent taxable period, then such Party shall be treated as a Refund Recipient and the economic benefit of so applying the refund shall be treated as a refund, and shall be paid within 30 business days under timing principals of Section 2.09(e).

 

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Section 2.09 Carrybacks and Claims for Refund.

(a) Brighthouse hereby agrees that if a Tax Return of a member of the Brighthouse Group for a Post-Distribution Tax Period reflects any Tax Attribute, then the applicable member of the Brighthouse Group shall elect to relinquish, waive or otherwise forgo the right to carry back any such Tax Attribute to a Pre-Distribution Tax Period to the extent permissible under applicable Law. Such elections shall include, but not be limited to, the election described in Treasury Regulation Section 1.1502-21(b)(3)(ii)(B), and any analogous election under state, local, or foreign Income Tax Laws, to waive the carryback of net operating losses or other Tax Attribute for U.S. federal Income Tax purposes.

(b) If, notwithstanding the provisions of Section 2.09(a), Brighthouse is required to carryback a Tax Attribute, MetLife shall promptly remit to Brighthouse any Tax Benefit that the MetLife Group actually realizes with respect to any such carryback on an “as and when” realized basis.

(c) If Brighthouse has a Tax Attribute that must be carried back to any Pre-Distribution Tax Period, Brighthouse shall notify MetLife in writing that such Tax Attribute must be carried back. Such notification shall include a description in reasonable detail of the basis for any Tax Benefit and the amount thereof, including supporting analysis that the Tax treatment of such Tax Attribute is correct.

(d) If MetLife pays any amount to Brighthouse under Section 2.09(b) and, as a result of a subsequent Final Determination, a Tax Benefit that gave rise to such payment is subsequently disallowed, MetLife shall notify Brighthouse of the amount to be repaid to MetLife, and Brighthouse shall then repay such amount to MetLife, together with any interest, fines, additions to Tax, penalties or any additional amounts imposed by a Tax Authority relating thereto.

(e) For purposes of this Agreement, a Tax Benefit shall be deemed to have been realized at the time any actual refund of Taxes is received or applied against other cash Taxes due, or at the time of filing a Tax Return (including a Tax Return relating to estimated Taxes) on which a Tax Item is applied in reduction of cash Taxes that would otherwise be payable.

Section 2.10 Allocation of Earnings and Profits and Tax Attributes.

(a) All Tax Attributes or earnings and profits determined on a consolidated or combined basis for Pre-Distribution Tax Periods shall be allocated to the MetLife Group and Brighthouse Group in accordance with the Code and the Treasury Regulations (and any applicable state, local, or non-U.S. law or regulation). MetLife shall reasonably determine the amounts and proper allocation of such Tax Attributes and earnings and profits as of the Distribution Date. In addition, the external auditor to both MetLife and Brighthouse shall have audited as part of the Form 10. MetLife and Brighthouse agree to compute their Tax liabilities for Post-Distribution Tax Periods consistent with that determination and allocation.

(b) The allocations made under this Section 2.10 shall be revised by MetLife to reflect each subsequent Final Determination that affects such allocations.

ARTICLE III

TAX RETURNS, TAX CONTESTS AND

OTHER ADMINISTRATIVE MATTERS

Section 3.01 Responsibility of Preparing Tax Returns.

(a) MetLife shall timely prepare any Joint Returns or MetLife Separate Returns, including any Adjustment Request with respect thereto.

(b) Brighthouse shall timely prepare any Brighthouse Separate Returns, including any Adjustment Request with respect thereto.

 

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(c) To the extent that any Tax Return described in Section 3.01(a) or 3.01(b) includes (1) matters for which another Party may have an indemnification obligation to the Tax Return Preparer or that may give rise to a refund to which that other Party would be entitled under this Agreement, or (2) matters that would require the other Party to prepare another Tax Return consistent with the treatment included therewith, the Tax Return Preparer shall (i) prepare the relevant portions of the Tax Return on a basis consistent with past practice, except (A) as required by applicable Law or to correct any clear error, (B) as a result of changes or elections made on any Joint Return that relate materially to the other Party, (C) as mutually agreed by the Parties; (ii) notify the other Party of any such portions not prepared on a basis consistent with past practice, and with respect to such portion, provide supporting analysis that the position on such Tax Return is correct; (iii) provide the other Party a reasonable opportunity to review the relevant portions of the Tax Return (and any related workpapers); (iv) consider in good faith any reasonable comments made by the other Party; and (v) use commercially reasonable efforts to incorporate, in the portion of such Tax Return related to the other Party’s potential indemnification obligation (or refund entitlement), any reasonable comments made by the other Party relating to the Tax Return Preparer’s compliance with clause (i). The Parties shall attempt in good faith to resolve any issues arising out of the review of any such Tax Return and any dispute not resolved within 30 business days shall be resolved in accordance with Section 5.05; provided however, (i) nothing in this Section 3.01(c) or Section 5.05 shall prevent Brighthouse or MetLife, respectively, from timely filing a Tax Return (with extensions) and (ii) if a payment is made to a Tax Authority in connection with the filing of a Tax Return during the pendency of a disagreement described in this sentence, the Parties shall make any further payments necessary to reflect the ultimate resolution of such disagreement within five (5) business days of such resolution.

Section 3.02 Filing of Tax Returns and Payment of Taxes. Each Party shall execute and timely file each Tax Return that it is responsible for filing under applicable Law and shall timely pay to the relevant Taxing Authority any amount shown as due on each such Tax Return..

Section 3.03 Tax Contests

(a) MetLife or Brighthouse, as applicable, shall, within 10 business days of becoming aware of any Tax Contest (including a Transaction Tax Contest) that could reasonably be expected to cause the other Party to have an indemnification obligation under this Agreement, notify the other Party of such Tax Contest and thereafter promptly forward or make available to the Indemnifying Party copies of notices and communications relating to the relevant portions of such Tax Contest. A failure by an Indemnitee to give notice as provided in this Section 3.03(a) (or to promptly forward any such notices or communications) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure; provided, however, that such Indemnitee shall make all commercially reasonable efforts to mitigate such failure, including by seeking an extension of any relevant time limitations or deadlines for response.

(b) Subject to the next two sentences, MetLife and Brighthouse each shall have the exclusive right to control the conduct and settlement of any Tax Contest, other than a Transaction Tax Contest, relating to any Tax Return that it is responsible for preparing pursuant to Section 3.01. With respect to a Tax Contest relating to a Joint Return described in clauses (1) or (2) of Section 3.01(c), (i) MetLife shall solely control the resolution of such Tax Contest, (ii) Brighthouse shall be permitted to participate in all formally scheduled meetings with any Tax Authority relating to such contest, (iii) MetLife shall allow Brighthouse a reasonable opportunity to comment on any material proposed course of action and shall take account of Brighthouse’s reasonable comments in relation thereto, (iv) MetLife shall conduct such Tax Contest with reasonable diligence and in good faith and (v) MetLife shall keep Brighthouse promptly informed of all material developments in relation to the Tax Contest, and (vi) if the outcome of a Tax Contest is material to Brighthouse but not material to MetLife, MetLife must either (A) obtain the consent of Brighthouse to settle such Tax Contest, which consent shall not be unreasonably withheld or (B) waive any and all rights to indemnification or payment from Brighthouse pursuant to Article II for matters arising from such Tax Contest. In determining the materiality of the outcome of a Tax Contest under this clause (vi), Brighthouse’s harm shall be measured by the amount of any cash paid and the present value of any lost Tax Attributes, computed using a discount rate equal to the Early Termination Rate (as defined in the Tax Receivables Agreement).

If the conduct or settlement of any portion or aspect of any Tax Contest that does not relate to a Joint Return could reasonably be expected to cause a Party to have an indemnification obligation or a refund entitlement under this Agreement, then (i) the Indemnifying Party shall have the right to share joint control over the conduct and settlement of that portion or aspect, and (ii) whether or not the Indemnifying Party exercises a right to control a Tax Contest, the Indemnitee shall not accept or enter into any settlement without the consent of the Indemnifying Party, which shall not be unreasonably withheld or delayed.

 

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(c) MetLife and Brighthouse shall have the right to control jointly the conduct and settlement of any Transaction Tax Contest. Each Party shall execute any power of attorney necessary to effectuate such joint control. Notwithstanding the foregoing, MetLife shall be entitled to control exclusively the conduct and settlement of any Transaction Tax Contest if MetLife notifies Brighthouse that (notwithstanding the rights and obligations of the Parties under this Agreement) MetLife agrees to pay (and indemnify Brighthouse against) any Tax-Related Losses resulting from such Transaction Tax Contest.

(d) Joint control of the conduct and settlement of any Tax Contest (or portion or aspect thereof) shall include but not be limited to the following: (i) neither Party shall accept or enter into any settlement of such Tax Contest (or the relevant portion or aspect thereof) without the consent of the other Party, which shall not be unreasonably withheld or delayed, (ii) both Parties shall have a right to review and consent to, which consent shall not be unreasonably withheld or delayed, any correspondence or filings to be submitted to any Taxing Authority with respect to such Tax Contest (or the relevant portion or aspect thereof) and (iii) both Parties shall have the right to attend any telephonic or in-person meetings with any Tax Authority or hearings unless waived in writing.

Section 3.04 Expenses and Applicability. Subject to Section 4.05, after the Distribution, each Party shall bear its own expenses in the course of any Tax Contest, other than expenses included in the definition of Tax-Related Losses.

ARTICLE IV

INTENDED TAX TREATMENT

Section 4.01 Tax Opinions/Rulings and Representation Letters. Brighthouse has executed and caused to be delivered to the applicable Tax Advisors the applicable Representation Letters (other than the MetLife Officer’s Certificate) and understands that such letters will be relied upon by the Tax Advisors in rendering the Tax Opinions. Brighthouse represents that (i) subject to any qualifications therein which are acceptable to the Tax Advisor, all information contained in the applicable Representation Letters executed and delivered by it is true, correct and complete in all material respects and (ii) it is not aware of any material inaccuracy in either the Representation Letters delivered by MetLife or the Ruling Request.

Section 4.02 Restrictions on Brighthouse.

(a) Brighthouse agrees that it will not take or fail to take, or permit any member of the Brighthouse Group to take or fail to take, any action where such action or failure to act would be materially inconsistent with or cause to be untrue any material, information, covenant or representation in any Representation Letters in any material respect (including, for the avoidance of doubt, the Officer’s Certificates, attached hereto as Exhibit A) or Tax Opinions/Rulings in any material respect. Brighthouse agrees that it will not take or fail to take, or permit any member of the Brighthouse Group to take or fail to take any action reasonably likely to jeopardize (i) the Tax-Free Status, (ii) the Retail Contribution, taken together with the Subsequent Sale qualifying as a fully taxable transfer of the Contributed Property under Section 1001 or (iii) the MRV Cell 2 Contribution from qualifying as a fully taxable transfer of the assets of MRV Cell 2 in an assumption reinsurance transaction.

(b) During the two-year period following the Distribution Date, Brighthouse directly or indirectly through one or more members of the Brighthouse Group shall continue the Active Trade or Business used to satisfy Section 355(b) of the Code, as described in the IRS Ruling and the KPMG Opinion.

(c) Brighthouse agrees that, from the date hereof until the first day after the two-year anniversary of the Distribution Date, it shall not (and shall not cause or permit any of its Affiliates to), in a single transaction or series of transactions:

(i) enter into any Proposed Acquisition Transaction or, to the extent Brighthouse has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur,

 

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(ii) liquidate, merge or consolidate with any other Person (whether that other Person or such Affiliate is the survivor) that was not already wholly owned by a member of the Brighthouse Group prior to such transaction;

(iii) sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of the assets that were transferred to Brighthouse as part of the HoldCo Contribution or sell or transfer (or cause or permit to be transferred) 33% or more of the gross assets of the Active Trade or Business or 33% or more of the consolidated gross assets of Brighthouse and its Affiliates (such percentages to be measured based on fair market value as of the Distribution Date),

(iv) redeem or otherwise repurchase (directly or through an Affiliate) any Brighthouse Capital Stock, or rights to acquire Brighthouse Capital Stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48),

(v) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Brighthouse Capital Stock (including, without limitation, through the conversion of one class of Brighthouse Capital Stock into another class of Brighthouse Capital Stock); or

(vi) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Representation Letters or the Tax Opinions/Rulings) which in the aggregate (and taking into account any other transactions described in this subparagraph (c)) would be reasonably likely to have the effect of causing or permitting one or more persons (whether or not acting in concert) to acquire directly or indirectly stock representing a Fifty-Percent or Greater Interest in Brighthouse or otherwise jeopardize the Intended Tax Treatment;

unless, prior to taking any such action set forth in the foregoing clauses (i) through (vi), (A) Brighthouse shall have requested that MetLife obtain a Ruling in accordance with Sections 4.04(b) and (d) of this Agreement to the effect that such transaction will not negatively affect the applicable Intended Tax Treatment and MetLife shall have received such a Ruling in form and substance reasonably satisfactory to MetLife, (B) Brighthouse shall provide MetLife with a Post-Distribution Tax Opinion in form and substance reasonably satisfactory to MetLife (and in determining whether such Tax Opinion is reasonably satisfactory, MetLife may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion) or (C) MetLife shall have waived the requirement to obtain such Ruling or Post-Distribution Tax Opinion. In providing the Tax Opinion to MetLife, Brighthouse may redact any material non-public information that, if MetLife receives, could raise anti-trust or securities issues; provided however, such redacted information does not materially impact the ability of MetLife to adequately review the Tax Opinion.

Section 4.03 Restrictions on MetLife.

(a) MetLife agrees that it will not take or fail to take, or permit any member of the MetLife Group to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any material, information, covenant or representation in any Representation Letters (including, for the avoidance of doubt, the Officer’s Certificates, attached hereto as Exhibit A) or Tax Opinions/Rulings. MetLife agrees that it will not take or fail to take, or permit any member of the MetLife Group to take or fail to take any action reasonably likely to jeopardize (i) the Tax-Free Status, (ii) the Retail Contribution, taken together with the Subsequent Sale qualifying as a fully taxable transfer of the Contributed Property under Section 1001 or (iii) the MRV Cell 2 Contribution from qualifying as a fully taxable transfer of the assets of MRV Cell 2 in an assumption reinsurance transaction.

(b) During the two-year period following the Distribution Date, MetLife directly or indirectly through one or more members of the MetLife Group shall continue the Active Trade or Business used to satisfy Section 355(b) of the Code, as described in the IRS Ruling and the KPMG Opinion.

 

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(c) MetLife agrees that, from the date hereof until the first day after the two-year anniversary of the Distribution Date, it shall not (and shall not cause or permit any of its Affiliates to), in a single transaction or series of transactions:

(i) enter into any Proposed Acquisition Transaction or, to the extent MetLife has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur,

(ii) liquidate, merge or consolidate with any other Person (whether that other Person or such Affiliate is the survivor) that was not already wholly owned by a member of the MetLife Group prior to such transaction;

(iii) sell or transfer 33% or more of the gross assets of the Active Trade or Business or 33% or more of the consolidated gross assets of MetLife and its Affiliates (such percentages to be measured based on fair market value as of the Distribution Date),

(iv) redeem or otherwise repurchase (directly or through an Affiliate) any MetLife Capital Stock, or rights to acquire MetLife Capital Stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48),

(v) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of MetLife Capital Stock (including, without limitation, through the conversion of one class of MetLife Capital Stock into another class of MetLife Capital Stock); or

(vi) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Representation Letters or the Tax Opinions/Rulings) which in the aggregate (and taking into account any other transactions described in this subparagraph (c)) would be reasonably likely to have the effect of causing or permitting one or more persons (whether or not acting in concert) to acquire directly or indirectly stock representing a Fifty-Percent or Greater Interest in MetLife or otherwise jeopardize the Intended Tax Treatment;

unless, prior to taking any such action set forth in the foregoing clauses (i) through (vi), (A) MetLife shall receive a Ruling in accordance with Section 4.04 of this Agreement to the effect that such transaction will not affect the applicable Intended Tax Treatment, or (B) MetLife shall receive a Post-Distribution Tax Opinion. MetLife shall provide a copy of that Tax Opinion to BHF, although MetLife may redact any material non-public information that, if Brighthouse receives, could raise anti-trust or securities issues.

Section 4.04 Procedures Regarding Opinions and Rulings.

(a) If Brighthouse notifies MetLife that it desires to take one of the actions described in clauses (i) through (vi) of Section 4.02(c) (a “Notified Action”), MetLife and Brighthouse shall reasonably cooperate to attempt to obtain the Ruling or Post-Distribution Tax Opinion referred to in Section 4.02(c), unless MetLife shall have waived the requirement to obtain such Ruling or Post-Distribution Tax Opinion.

(b) MetLife agrees that at the reasonable request of Brighthouse pursuant to Section 4.02(c), MetLife shall cooperate with Brighthouse and use its reasonable best efforts to seek to obtain or assist in obtaining, as expeditiously as possible, a Ruling from the IRS or other applicable Tax Authority or a Post-Distribution Tax Opinion for the purpose of permitting Brighthouse to take the Notified Action. Further, in no event shall MetLife be required to file any Ruling Request under this Section 4.04(b) unless Brighthouse represents that (i) it has read the Ruling Request, and (ii) all information and representations, if any, relating to any member of the Brighthouse Group, contained in the Ruling Request documents are (subject to any qualifications therein) true, correct and complete. Brighthouse shall reimburse MetLife for all reasonable costs and expenses incurred by the MetLife Group in obtaining a Ruling or Post-Distribution Tax Opinion requested by Brighthouse within ten business days after receiving an invoice from MetLife therefor.

 

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(c) MetLife shall have the right to obtain a Ruling or a Post-Distribution Tax Opinion at any time in its sole and absolute discretion, unless such Ruling or Post-Distribution Tax Opinion would violate MetLife’s covenants under Section 4.03. If MetLife determines to obtain a Ruling or a Post-Distribution Tax Opinion, Brighthouse shall (and shall cause each Affiliate of Brighthouse to) cooperate with MetLife and take any and all actions reasonably requested by MetLife in connection with obtaining the Ruling or Post-Distribution Tax Opinion (including, without limitation, by making any representation or covenant or providing any materials or information requested by the IRS or Tax Advisor); provided that Brighthouse shall not be required to make (or cause any Affiliate of Brighthouse to make) any representation that is untrue, provide any covenant as to future matters or events over which it has no control or that is materially more restrictive in scope than the covenants made by Brighthouse in this Agreement with respect to the subject matter covered by such covenants, or provide any material or information it reasonably considers confidential unless reasonably acceptable confidentiality provisions are agreed to between the Parties. Subject to Section 4.04(b), MetLife and Brighthouse shall each bear its own costs and expenses in obtaining a Ruling or a Post-Distribution Tax Opinion.

(d) Brighthouse hereby agrees that MetLife shall have sole and exclusive control over the process of obtaining any Ruling, and that only MetLife shall apply for a Ruling. In connection with obtaining a Ruling pursuant to Section 4.04(b), (i) MetLife shall keep Brighthouse informed in a timely manner of all material actions taken or proposed to be taken by MetLife in connection therewith; (ii) MetLife shall (A) reasonably in advance of the submission of any Ruling Request documents provide Brighthouse with a draft copy thereof, (B) reasonably consider Brighthouse’s comments on such draft copy, and (C) provide Brighthouse with a final copy; and (iii) MetLife shall provide Brighthouse with notice reasonably in advance of, and Brighthouse shall have the right to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling. Neither Brighthouse nor any Affiliates of Brighthouse shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the tax consequences of the Transactions.

Section 4.05 Liability for Tax-Related Losses.

(a) Notwithstanding anything in this Agreement or the Master Separation Agreement to the contrary, subject to Section 4.05(c), Brighthouse shall be responsible for, and shall indemnify and hold harmless MetLife and each of its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to or result from any one or more of the following: (i) the acquisition (other than pursuant to the Transactions) of all or a portion of the stock and/or assets of Brighthouse and/or its subsidiaries by any means whatsoever by any Person, (ii) any negotiations, understandings, agreements or arrangements by Brighthouse with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of Brighthouse representing a Fifty-Percent or Greater Interest therein, (iii) any action or failure to act by Brighthouse or a member of the Brighthouse Group after the Distribution (including, without limitation, any amendment to Brighthouse’s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of Brighthouse stock (including, without limitation, through the conversion of one class of Brighthouse Capital Stock into another class of Brighthouse Capital Stock), (iv) any act or failure to act by Brighthouse or any Brighthouse Affiliate described in Section 4.02 (regardless of whether such act or failure to act is covered by a Ruling, Post-Distribution Tax Opinion or waiver described in clause (A), (B) or (C) of Section 4.02(c)) or (v) any breach by Brighthouse of its agreement and representation set forth in Section 4.01.

(b) Notwithstanding anything in this Agreement or the Master Separation Agreement to the contrary, subject to Section 4.05(c), MetLife shall be responsible for, and shall indemnify and hold harmless Brighthouse and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to, or result from any one or more of the following: (i) the acquisition (other than pursuant to the Transactions) of all or a portion of the stock and/or assets of MetLife and/or its subsidiaries by any means whatsoever by any Person, (ii) any negotiations, understandings, agreements or arrangements by MetLife with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of MetLife representing a Fifty-Percent or Greater Interest therein, (iii) any action or failure to act by MetLife or a member of the MetLife Group after the Distribution (including, without limitation, any amendment to MetLife’s certificate of incorporation (or other organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of MetLife stock (including, without limitation, through the conversion of one class of MetLife Capital Stock into another class of MetLife Capital Stock), or (iv) any act or failure to act by MetLife or any MetLife Affiliate described in Section 4.03.

 

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(c) To the extent that any Tax-Related Loss is subject to indemnity under both Sections 4.05(a) and Section 4.05(b), responsibility for such Tax-Related Loss shall be shared by MetLife and Brighthouse equally.

Section 4.06 Reporting. MetLife and Brighthouse shall (i) timely file any appropriate information and statements (including as required by Section 6045B of the Code and Treasury Regulations Section 1.355-5 and, to the extent applicable, Section 1.368-3 of the Regulations) to report each step of the Transactions as qualifying for its Tax-Free Status (as applicable) and (ii) absent a change of Law or an applicable Final Determination otherwise, not take any position on any Tax Return that is inconsistent with such qualification or qualification for the Intended Tax Treatment.

ARTICLE V

PROCEDURAL MATTERS

Section 5.01 Cooperation.

(a) Each Party shall cooperate with reasonable requests from the other Party in matters covered by this Agreement, including in connection with the preparation and filing of Tax Returns, the calculation of Taxes, the determination of the proper financial accounting treatment of Tax Items and the conduct and settlement of Tax Contests. Such cooperation shall include:

(1) retaining until the expiration of the relevant statute of limitations (including extensions) plus one year, any and all records, documents, accounting data, computer data, actuarial data, investment data and other information (“Records”) necessary for the preparation, filing, review, audit or defense of all Tax Returns relevant to an obligation, right or liability of either Party under this Agreement;

(2) providing the other Party reasonable access to Records (in the format reasonably determined by the other Party) and to its personnel (ensuring their cooperation and reasonable assistance) and premises during normal business hours to the extent relevant to an obligation, right or liability of the other Party under this Agreement or otherwise reasonably required by the other Party to complete Tax Returns, comply with audit requirements, participate in any audit or examination of Tax Returns or to compute the amount of any payment contemplated by this Agreement; and

(3) after the period of time described in Section 5.01(a)(1) has expired, notifying the other Party prior to disposing of any relevant Records and affording the other Party the opportunity to take possession or make copies of such Records at its discretion.

(b) Additionally, each Party shall provide to the other Party (in the format reasonably determined by

the other Party) all information and assistance requested by the other Party as reasonably necessary to

(1) prepare any Tax Return described in Section 3.01(a) or Section 3.01(b);

(2) respond to any Tax Contest;

(3) obtain an opinion from an outside Tax Advisor with respect to matters (1) and (2) above; and

(4) comply with auditor requests with respect to matters (1) and (2) above;

 

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Any such request shall be fulfilled as soon as practicable after receipt of a written notice describing the information required.

Section 5.02 Interest. Any payments required pursuant to this Agreement that are not made within the time period specified in this Agreement shall bear interest from the end of that period. Interest required to be paid pursuant to this Agreement shall, unless otherwise specified, be computed at the underpayment rate for large corporate underpayments, in effect from time to time under Section 6621 of the Code, while such amount is outstanding.

Section 5.03 Indemnification Claims and Payments.

(a) Except as provided in Article III, an Indemnitee shall be entitled to make a claim for payment with respect to Taxes (or Tax-Related Losses) under this Agreement only after actual payment by the Indemnitee or a Final Determination that such payment is required (whichever is earlier). The Indemnitee shall provide to the Indemnifying Party notice of such claim within 60 business days of the first date on which it so becomes entitled to make such claim. Such notice shall include a description of such claim and a detailed calculation of the amount claimed.

(b) The Indemnifying Party shall make the claimed payment to the Indemnitee within 30 business days after receiving such notice, unless the Indemnifying Party reasonably disputes its liability for, or the amount of, such payment.

(c) A failure by an Indemnitee to give notice as provided in Section 5.03(a) shall not relieve the Indemnifying Party’s indemnification obligations under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure. However, a failure by Indemnitee to give the notice required by this Agreement shall extend the Indemnifying Party’s time for payment, without application of interest, until conforming notice is provided.

Section 5.04 Treatment of Payments. Except to the extent otherwise required by applicable Tax law, Brighthouse and MetLife agree that (i) any payment payable pursuant to this Agreement shall be treated as if it occurred immediately prior to the Distribution and shall be treated as being distributed or contributed pursuant to the plan of reorganization that includes the Distribution and (ii) shall not be subject to any U.S. federal income tax withholdings under applicable Tax law as of the date hereof. In the event of a change in applicable Tax law that results in a non-creditable withholding tax, the Parties agree to renegotiate the terms of this Agreement in good faith to minimize the economic effect of any withholding tax. Notwithstanding anything to the contrary herein, to the extent a Party makes a payment of interest as provided for in Section 5.02, the interest payment shall be treated as interest expense to the payor (deductible to the extent provided by applicable tax law) and as interest income by the payee (includible in income to the extent provided by applicable tax law).

Section 5.05 Dispute Resolution. The Parties shall work together in good faith to resolve any disputes under this Agreement. If the Parties are unable to resolve the dispute within 30 business days, such dispute shall be resolved by a Tax Advisor proposed by MetLife and agreed to by Brighthouse and whose engagement letter shall be executed by both Parties with fees and costs to be shared equally by MetLife and Brighthouse. If the Parties are unable to agree on a Tax Advisor within 10 business days after the end of the 30 business day period in the previous sentence, the Parties shall each select a Tax Advisor, and those two Tax Advisors shall select a third Tax Advisor to resolve the dispute. The fees and costs of such third Tax Advisor shall be shared equally by MetLife and Brighthouse.

 

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ARTICLE VI

MISCELLANEOUS

Section 6.01 Termination. The indemnification and other obligations under this Agreement will terminate without further action six months after the expiration of all applicable statutes of limitation (including extensions) except for claims for indemnification for which the Indemnitee has provided notice to the Indemnifying Party , within the applicable indemnification survival period described in the previous clause. If terminated, no Party will have any Liability of any kind to the other Party or any other Person on account of this Agreement except as specified in the previous sentence.

Section 6.02 Survival. Except as expressly set forth in this Agreement, the covenants and indemnification obligations in this Agreement shall remain in full force and effect until this Agreement is terminated pursuant to Section 6.01.

Section 6.03 Master Separation Agreement. The Parties agree that, in the event of a conflict between the terms of this Agreement and the Master Separation Agreement with respect to the subject matter hereof, the terms of this Agreement shall govern.

Section 6.04 Confidentiality. Each Party hereby acknowledges that confidential information of such Party or its Affiliates may be exposed to employees and agents of the other Party or its Affiliates as a result of the activities contemplated by this Agreement. Each Party agrees, on behalf of itself and its Affiliates, that such Party’s obligations with respect to information and data of the other Party or its Affiliates shall be governed by the Master Separation Agreement.

Section 6.05 Counterparts; Entire Agreement.

(a) This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each Party and delivered to the other Party. This Agreement may be executed by facsimile or PDF signature and a facsimile or PDF signature shall constitute an original for all purposes.

(b) This Agreement, the Master Separation Agreement, the other Transaction Documents and the Appendices, Exhibits and Schedules hereto and thereto contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter, and there are no agreements or understandings between the Parties with respect to the subject matter hereof other than those set forth or referred to herein or therein.

Section 6.06 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York, irrespective of the choice of Laws and principles of the State of New York, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

Section 6.07 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.07.

Section 6.08 No Double Recovery. No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged Party has been fully compensated under any other provision of this Agreement or under any other agreement or action at law or equity; provided however, this document shall be read in conjunction with the Tax Receivables Agreement and thus, Tax Items (and related payments therefore, if applicable) covered by the Tax Receivables Agreement shall be governed by that Agreement and all other Tax Items (and related payments therefore, if applicable) shall be governed by this Agreement, without any double recovery.

 

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Section 6.09 Assignability. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise except as described herein. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Notwithstanding the foregoing, either Party may assign this Agreement without consent in connection with (a) a merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or substantially all of such Party’s assets, or (b) the sale of all or substantially all of such Party’s assets; provided, however, that the assignee expressly assumes in writing all of the obligations of the assigning Party under this Agreement, and the assigning Party provides written notice and evidence of such assignment and assumption to the non-assigning Party. No assignment permitted by this Section 6.09 shall release the assigning Party from liability for the full performance of its obligations under this Agreement.

Section 6.10 Authority. Each of the Parties represents to the other that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate or other action, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.

Section 6.11 Third-Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Parties hereto and are not intended to confer upon any Person except the Parties hereto any rights or remedies hereunder and there are no third-party beneficiaries of this Agreement and this Agreement shall not provide any third Person with any remedy, claim, liability, reimbursement, cause of action or other right in excess of those existing without reference to this Agreement.

Section 6.12 Notices. Each Party giving any notice required or permitted under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by overnight courier service, by e-mail (followed by delivery of an original via overnight courier service) or by registered or certified mail (postage prepaid, return receipt requested) to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a Notice):

If to Brighthouse, to:

Brighthouse Services LLC

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attn: SVP Tax

Copy to:

Brighthouse Services LLC

Gragg Building

11225 North Community House Road

Charlotte, NC 28277

Attn: General Counsel

 

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with a copy to (which shall not constitute notice):

Sidley Austin LLP

One South Dearborn

Chicago, IL 60603

Attn: Tracy Williams

Fax:  (312) 853-7036

If to MetLife, to:

MetLife, Inc.

200 Park Avenue

New York, NY 10166

Attn: SVP Tax Director

Fax:  (212) 578-6542

Copy to:

MetLife, Inc.

200 Park Avenue

New York, NY 10166

Attention: General Counsel

with a copy to (which shall not constitute notice):

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Attn: Christopher J. Peters

Fax:  (212) 728-9868

A Party may change the address for receiving notices under this Agreement by providing written notice of the change of address to the other.

Section 6.13 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon any such determination, any such provision, to the extent determined to be invalid, void or unenforceable, shall be deemed replaced by a provision that such court determines is valid and enforceable and that comes closest to expressing the intention of the invalid, void or unenforceable provision.

Section 6.14 Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 6.15 Waivers of Default. No failure or delay of either Party (or its Affiliates) in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. Waiver by either Party of any default by the other Party of any provision of this Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default.

 

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Section 6.16 Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, MetLife shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Brighthouse shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the remedies at law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived. The Parties acknowledge and agree that the right of specific enforcement is an integral part of this Agreement and without that right, neither MetLife nor Brighthouse would have entered into this Agreement; provided further, nothing in this Section 6.16 shall require Brighthouse to give MetLife any material non-public information.

Section 6.17 Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by either Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each Party.

Section 6.18 Compliance by Affiliates. The Parties shall cause their respective Affiliates to comply with this Agreement.

 

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of the day and year first written above.

 

METLIFE, INC.

By:  

 

Name:

 

 

Title:

 

 

BRIGHTHOUSE FINANCIAL, INC.

By:

 

 

Name:

 

 

Title:

 

 

 

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EX-99.1
Table of Contents

Exhibit 99.1

 

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

Preliminary Information Statement

(Subject to completion, dated April 17, 2017)

Information Statement

Distribution of Common Stock of

BRIGHTHOUSE FINANCIAL, INC.

 

 

We are sending you this information statement in connection with the separation of Brighthouse Financial, Inc. from MetLife, Inc. To effect the separation, MetLife will distribute at least 80.1% of the shares of Brighthouse’s common stock on a pro rata basis to the holders of MetLife common stock. We expect that the distribution of Brighthouse common stock will be tax-free to MetLife’s U.S. shareholders for U.S. federal income tax purposes, except for cash that shareholders receive in lieu of fractional shares.

If you are a record holder of MetLife common stock as of 5:00 p.m., New York City time on [●], 2017, which is the record date for the distribution, you will be entitled to receive [●] shares of Brighthouse common stock for every [●] shares of MetLife common stock you hold on that date. MetLife will distribute the shares of Brighthouse common stock in book-entry form, which means that we will not issue physical stock certificates. The distribution agent will not distribute any fractional shares of Brighthouse common stock. Instead, the distribution agent will aggregate fractional shares into whole shares, sell, or cause to be sold, the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata, to each holder (net of any required withholding for taxes applicable to each holder) who would otherwise have been entitled to receive fractional shares in the distribution.

The distribution will be effective as of 5:00 p.m., New York City time, on [●], 2017. After the distribution becomes effective, we will be a separate, publicly traded company.

MetLife’s shareholders are not required to vote on or take any other action in connection with the distribution. We are not asking you for a proxy, and you are requested not to send us a proxy.

MetLife’s shareholders will not be required to pay any consideration for the shares of Brighthouse common stock they receive in the distribution, surrender or exchange their shares of MetLife common stock or take any other action in connection with the separation.

MetLife currently owns all of the outstanding shares of Brighthouse common stock. Until the distribution occurs, MetLife will have the sole and absolute discretion to determine and change the terms of the distribution, including establishing the record date for the distribution and the distribution date, as well as to reduce the number of shares of common stock it will retain, if any, following the distribution.

No trading market for Brighthouse common stock currently exists. We have applied to list Brighthouse common stock on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “BHF”. Assuming the Brighthouse common stock is approved for listing, we anticipate that a limited trading market for Brighthouse common stock, commonly known as a “when-issued” trading market, will develop on or shortly before the record date for the distribution and will continue up to and including the date of the distribution. We anticipate “regular-way” trading of Brighthouse common stock will begin on the first trading day after the distribution date.

 

 

In reviewing this information statement, you should carefully consider the matters described in the section entitled “Risk Factors” beginning on page 31 of this information statement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities.

The date of this information statement is [], 2017.

MetLife first mailed a Notice of Internet Availability of Information Statement Materials containing instructions on how to access this information statement to its shareholders on or about [●], 2017.

 


Table of Contents

TABLE OF CONTENTS

 

Section    Page  

Summary

     1  

Risk Factors

     31  

The Separation and Distribution

     78  

Formation of Brighthouse and the Restructuring

     89  

Recapitalization

     97  

Dividend Policy

     99  

Selected Historical Combined Financial Data

     100  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     103  

Quantitative and Qualitative Disclosures About Market Risk

     196  

Business

     202  

Regulation

     251  

Management

     264  

Compensation of Executive Officers and Directors

     269  

Beneficial Ownership of Common Stock

     274  

Certain Relationships and Related Person Transactions

     275  

Description of Capital Stock

     290  

Shares Eligible for Future Sale

     293  

Where You Can Find More Information

     295  

Glossary

     296  

Index to Financial Statements, Notes and Schedules

     F-1  

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This information statement may contain information that includes or is based upon forward-looking statements. Forward-looking statements give expectations or forecasts of future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning, or are tied to future periods, in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, statements regarding the separation and distribution, including the timing and expected benefits thereof, the formation of Brighthouse and the recapitalization actions, including receiving required regulatory approvals and the timing and expected benefits thereof, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

Any or all forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining the actual future results of Brighthouse, its subsidiaries and affiliates. These statements are based on current expectations and the current economic environment. They involve a number of risks and uncertainties that are difficult to predict. These statements are not guarantees of future performance. Actual results could differ materially from those expressed or implied in the forward-looking statements due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others:

 

    risks relating to the formation of Brighthouse and our recapitalization;

 

    the timing of the separation and the distribution, whether the conditions to the distribution will be met, whether the separation and the distribution will be completed, and whether the distribution will qualify for non-recognition treatment for U.S. federal income tax purposes and potential indemnification to MetLife if the distribution does not so qualify;

 

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    the impact of the separation on our business and profitability due to MetLife’s strong brand and reputation, the increased costs related to replacing arrangements with MetLife with those of third-parties and incremental costs as a public company;

 

    whether the operational, strategic and other benefits of the separation can be achieved, and our ability to implement our business strategy;

 

    our degree of leverage following the separation due to indebtedness incurred in connection with the separation;

 

    differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models;

 

    higher risk management costs and exposure to increased counterparty risk due to guarantees within certain of our products;

 

    the effectiveness of our proposed exposure management strategy, and the timing of its implementation and the impact of such strategy on net income volatility and negative effects on our statutory capital;

 

    the additional reserves we will be required to hold against our variable annuities as a result of AG 43;

 

    a sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products;

 

    the effect adverse capital and credit market conditions may have on our ability to meet liquidity needs and our access to capital;

 

    the impact of regulatory, legislative or tax changes on our insurance business or other operations;

 

    the effectiveness of our risk management policies and procedures;

 

    the availability of reinsurance and the ability of our counterparties to our reinsurance or indemnification arrangements to perform their obligations thereunder;

 

    heightened competition, including with respect to service, product features, scale, price, actual or perceived financial strength, claims-paying ratings, credit ratings, e-business capabilities and name recognition;

 

    changes in accounting standards, practices and/or policies applicable to us;

 

    the ability of our insurance subsidiaries to pay dividends to us, and our ability to pay dividends to our shareholders;

 

    our ability to market and distribute our products through distribution channels; and

 

    our ability to attract and retain key personnel.

For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements included and the risks, uncertainties and other factors identified elsewhere in this information statement, including in the section entitled “Risk Factors.” Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.

 

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MARKET DATA

In this information statement, we present certain market and industry data and statistics. This information is based on third-party sources which we believe to be reliable. Market ranking information is generally based on industry surveys and therefore the reported rankings reflect the rankings only of those companies who voluntarily participate in these surveys. Accordingly, our market ranking among all competitors may be lower than the market ranking set forth in such surveys. In some cases, we have supplemented these third-party survey rankings with our own information, such as where we believe we know the market ranking of particular companies who do not participate in the surveys.

TRADEMARKS, SERVICE MARKS AND COPYRIGHTS

We own or have rights to trademarks, service marks or trade names that we use in connection with the operation of our business. In addition, our names, logos and website names and addresses are our service marks or trademarks. Other trademarks, service marks and trade names appearing in this offering memorandum are the property of their respective owners. We also own or have the rights to copyrights that protect the content of our products. Solely for convenience, the trademarks, service marks, tradenames and copyrights referred to in this offering memorandum are listed without the ©, ® and symbols, but we will assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and tradenames.

 

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SUMMARY

This summary highlights selected information from this information statement and provides an overview of Brighthouse, our separation from MetLife and MetLife’s distribution of our common stock to MetLife’s shareholders. For a more complete understanding of our business and the distribution, you should read the entire information statement carefully, particularly the discussion of “Risk Factors” beginning on page 31 of this information statement, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the audited historical combined financial statements of the MetLife U.S. Retail Separation Business (defined below) and the notes to those financial statements appearing elsewhere in this information statement.

We use the following terms to refer to the items indicated:

 

    the Company,” “we,” “our” and “us” refer to Brighthouse, the entity that at the time of the distribution will hold, through its subsidiaries, the assets (including the equity interests of certain MetLife subsidiaries) and liabilities associated with MetLife’s Brighthouse Financial segment;

 

    Brighthouse” refers to Brighthouse Financial, Inc., a Delaware corporation, and, where appropriate in context, to one or more of its subsidiaries, or all of them taken as a whole;

 

    MetLife” refers to MetLife, Inc., a Delaware corporation, and, where appropriate in context, to one or more of its subsidiaries, or all of them taken as a whole;

 

    the term “separation” refers to the separation of MetLife’s Brighthouse Financial segment from MetLife’s other businesses and the creation of a separate, publicly traded company, Brighthouse, to hold the assets (including the equity interests of certain MetLife subsidiaries) and liabilities associated with MetLife’s Brighthouse Financial segment from and after the distribution;

 

    the term “distribution” refers to the distribution of at least 80.1% of the shares of Brighthouse common stock outstanding immediately prior to the distribution date by MetLife to shareholders of MetLife as of the record date;

 

    the term “distribution date” means the date on which the distribution occurs, and we expect the separation to occur on such date as well.

Prior to MetLife’s distribution of the shares of our common stock to its shareholders, MetLife will undertake a series of transactions described under “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions” (the “restructuring”). In the third quarter of 2016, MetLife reorganized its businesses into six segments: U.S.; Asia; Latin America; Europe, the Middle East and Africa (“EMEA”); MetLife Holdings; and Brighthouse Financial. In addition, MetLife will continue to report certain of its results of operations in Corporate & Other. Following the restructuring:

 

    MetLife will conduct the following businesses:

 

    the remaining portions of MetLife’s former Retail segment, which MetLife does not plan to separate and include in Brighthouse, which will include the life and annuity business sold through Metropolitan Life Insurance Company (“MLIC”), General American Life Insurance Company (“GALIC”) and Metropolitan Tower Life Insurance Company (“MTL”), including the MLIC pre-demutualization closed block. These businesses are reflected in its MetLife Holdings segment that consists of operations relating to products and businesses no longer actively marketed by MetLife in the United States. The MetLife Holdings segment also includes the long-term care business, previously reported as part of MetLife’s former Group, Voluntary & Worksite Benefit (“GVWB”) segment, and the reinsurance treaty relating to MetLife’s former Japan joint venture, previously reported in Corporate & Other;

 



 

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    the Property & Casualty business, the Retirement & Income Solutions business (formerly known as MetLife’s Corporate Benefit Funding segment) and the Group Benefits business (consisting of the remaining components of the GVWB segment, including the individual disability insurance business previously reported in MetLife’s former Retail segment), which are reflected in its U.S. segment;

 

    the U.S. Direct business, previously reported as part of MetLife’s Latin America segment, which was disaggregated and is reported in its U.S. segment and in Corporate & Other; and

 

    its Asia and EMEA segments.

 

    we will conduct our business principally through the following life insurance company subsidiaries of MetLife as well as several other legal entities which support the issuance, sale and marketing of our life insurance and annuity products:

 

    Brighthouse Life Insurance Company (“Brighthouse Insurance”), formerly known as MetLife Insurance Company USA (“MetLife USA”), our largest insurance operating company, domiciled in Delaware and licensed to write business in 49 states;

 

    New England Life Insurance Company (“NELICO”), domiciled in Massachusetts and licensed to write business in all 50 states; and

 

    Brighthouse Life Insurance Company of NY (“Brighthouse Insurance NY”), formerly known as First MetLife Investors Insurance Company (“FMLI”), domiciled in New York and licensed to write business in New York, which is expected to be a subsidiary of Brighthouse Insurance.

We refer to the audited historical combined financial statements of these entities as those of the “MetLife U.S. Retail Separation Business.”

In addition, certain specified assets and liabilities will be allocated between MetLife and us as described under “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions.”

Our Company

We are a major provider of life insurance and annuity products in the United States with $222 billion of total assets, total shareholder’s net investment of $14.9 billion, including accumulated other comprehensive income (“AOCI”), and approximately $653 billion of life insurance face amount in-force, as of December 31, 2016. Our in-force book of products consists of approximately 2.8 million insurance policies and annuity contracts as of December 31, 2016, which includes variable, fixed, index-linked and income annuities, universal life, term life, variable life and whole life insurance policies. We offer our products solely in the United States through multiple independent distribution channels and marketing arrangements with a diverse network of distribution partners.

Our Background and Overview

Prior to the distribution, the companies that will become our subsidiaries were wholly owned by MetLife, a global insurance holding company with a corporate history beginning in 1868. Brighthouse Insurance, which will be our largest operating subsidiary, was formed in November 2014 through the merger of three affiliated life insurance companies and a former offshore, internal reinsurance subsidiary that mainly reinsured guarantees associated with variable annuity products issued by MetLife affiliates. The principal purpose of the merger was to provide increased transparency relative to capital allocation and variable annuity risk management. In order to further our capabilities to market and distribute our products, prior to the distribution, MetLife will contribute to

 



 

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us (i) several entities including Brighthouse Insurance, NELICO and Brighthouse Insurance NY, (ii) a licensed broker-dealer, (iii) a licensed investment advisor and (iv) other entities which are necessary for the execution of our strategy. See “Formation of Brighthouse and the Restructuring — Our History.”

In 2012, MetLife changed the organizational structure of its Retail segment, of which we formed the principal part, to implement an integrated operating model with dedicated management. Consistent with this restructuring, over the succeeding four years MetLife has implemented certain actions with respect to its former Retail segment, including the establishment of a centralized office campus in Charlotte, North Carolina, and further bolstering the management team. This team, which has been responsible for managing MetLife’s retail business prior to the distribution, will continue to manage our business as a separate company.

We will seek to be a financially disciplined and, over time, a cost-competitive product manufacturer with an emphasis on independent distribution. We aim to leverage our large block of in-force life insurance policies and annuity contracts to operate more efficiently. We believe that our strategy of offering a targeted set of products to serve our customers and distribution partners, each of which is intended to produce positive statutory distributable cash flows on an accelerated basis compared to our legacy products, will enhance our ability to invest in our business and distribute cash to our shareholders over time. We also believe that our product strategy of offering a more tailored set of new products and our recent agreement to outsource a significant portion of our client administration and service processes, is consistent with our focus on reducing our expense structure over time.

Risk management of both our in-force book and our new business to enhance sustained, long-term shareholder value is fundamental to our strategy. Consequently, in writing new business we intend to prioritize the value of the new business we write over sales volumes. We assess the value of new products by taking into account the amount and timing of cash flows, the use and cost of capital required to support our insurance financial strength ratings and the cost of risk mitigation. We will remain focused on maintaining our strong capital base and we have established a risk management approach which will be implemented in connection with the separation that seeks to mitigate the effects of severe market disruptions and other economic events on our business. See “Business — Description of our Segments, Products and Operations — Variable Annuity Risk Management,” “Business — Description of our Segments, Products and Operations — Run-off — ULSG Market Risk Exposure Management” and “Risk Factors — Risks Related to our Business — Our proposed variable annuity exposure management strategy may not be fully implemented prior to the distribution, may not be effective, may result in net income volatility and may negatively affect our statutory capital.”

We believe that general demographic trends in the U.S. population, the increase in under-insured individuals, the potential risk to governmental social safety net programs and the shifting of responsibility for retirement planning and financial security from employers and other institutions to individuals will create opportunities to generate significant demand for our products. We also believe our transition to an independent distribution system will enhance our ability to operate most effectively within the emerging requirements of the April 6, 2016 Department of Labor (the “DOL”) fiduciary rule (“Fiduciary Rule”) that sets forth a new regulatory framework for the sale of insurance and annuity products to Employee Retirement Income Security Act of 1974 (“ERISA”) qualified plans, which is a significant market for annuity products.

For the year ended December 31, 2016 we had a net loss of $2.9 billion and generated $686 million of operating earnings as compared to net income of $1.1 billion and $1.5 billion of operating earnings for the year ended December 31, 2015. The net loss was driven by reserve strengthening including the effect of our annual review of actuarial assumptions for our variable annuities business, our second quarter refinement in the actuarial model which we use to calculate the reserves for our in-force book of universal life insurance policies with secondary guarantees (“ULSG”) and the loss recognition, mostly in the form of a write down of deferred acquisition costs (“DAC”), triggered by the move of our ULSG products into the Run-off segment in the fourth

 



 

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quarter. In addition to reserve strengthening, derivative losses on our economic hedges of certain liabilities also contributed to the net loss, primarily due to the impact of the large fourth quarter rise in interest rates without an offset from the liabilities being hedged due to the insensitivity of those GAAP liabilities to changes in interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Combined Results for the Years Ended December 31, 2016, 2015 and 2014.” Operating earnings is a non-GAAP financial measure. For a reconciliation of operating earnings to net income (loss), see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations.”

Our Segments

For operating purposes, the Company has established three new reporting segments: (i) Annuities, (ii) Life and (iii) Run-off. Our Run-off segment consists of operations related to products which we are not actively selling and which are separately managed. In addition, the Company reports certain of its results of operations not included in the segments in Corporate & Other. We provide an overview of our reporting segments and Corporate & Other below.

Annuities

We are a major provider of annuity products in the United States, with $152.1 billion and $148.4 billion in total annuity assets as of December 31, 2016 and December 31, 2015, respectively. Our annuity product offerings include variable, fixed, index-linked and income annuities designed to address contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer and income security. We earn various types of fee revenue based on the account value, fund assets and guaranteed benefit base of our variable annuity products, as well as the investment spread which we earn on the general account assets supporting our annuity products. Based on $136.5 billion of assets under management (“AUM”), which we define as our general account investments and our separate account assets, we believe we would have ranked fifth among U.S. life insurers in annuity AUM as of December 31, 2015.

We seek to manage changes in equity market and interest rate exposures to our existing book of annuity business through our strong statutory capitalization and our selection of derivative instruments, which will be driven in part by our goal of preserving our ability to benefit from positive changes to equity markets and interest rates. See “Business — Description of our Segments, Products and Operations — Variable Annuity Risk Management.” With respect to new business, we intend to be disciplined in our risk selection, innovative in our product design and seek to diversify our product mix. Beginning in 2013, we began to shift our new annuity business towards products with diversifying market and contract holder behavioral risk attributes and improved risk-adjusted cash returns. Examples of this include transitioning from the sale of variable annuities with guaranteed minimum income benefits (“GMIB”) to the sale of variable annuities with guaranteed minimum withdrawal benefits (“GMWB”), and our increased emphasis on MetLife Shield Level SelectorSM Annuity (“Shield Level Selector”), a single premium deferred index-linked annuity product for which we had new deposits of approximately $1.7 billion and $0.9 billion for the years ended December 31, 2016 and December 31, 2015, respectively.

Life

We are also one of the largest life insurance companies in the United States based on ordinary and term life insurance issued, with approximately 1.4 million policies in-force and approximately $653 billion of life insurance face amount in-force as of December 31, 2016. Our in-force book of life insurance includes variable life, term life, universal life and whole life policies. Our life insurance product offerings are designed to address

 



 

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our policyholders’ needs for financial security and protected wealth transfer, which may be provided on a tax-advantaged basis. In addition to contributing to our revenues and earnings, mortality protection-based products offered by our Life segment permit us to diversify the longevity and other risks in our Annuities segment.

Beginning with the first quarter of 2017 we have focused on term life and universal life without secondary guarantees and therefore suspended new sales of ULSG as well as participating whole life. We seek to be innovative in introducing new life products that meet the needs of our target markets and distribution partners and increase value for our shareholders. For example, starting in 2013, we significantly scaled back our sales of ULSG products with lifetime guarantees. In 2015, we introduced a universal life policy with levelized commissions over time that provides clients with death benefit protection with a cash value that may increase over time and no secondary guarantees. Consistent with our strategy of prioritizing the value of the new business we write over sales volume, we expect our total face amount of life insurance policies to decline, but, over time, for our new life insurance business to provide better shareholder value creation. With the suspension of all new ULSG sales, we moved results associated with ULSG products from our Life segment into our Run-off segment in the fourth quarter of 2016 retrospectively for all periods presented. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Overview — Certain Business Events — ULSG Re-segmentation.”

Run-off

This segment consists of operations related to products which we are not actively selling and which are separately managed, including structured settlements, company-owned life insurance (“COLI”) policies, bank-owned life insurance (“BOLI”) policies, funding agreements and ULSG. With the exception of ULSG, these legacy business lines were not part of MetLife’s former Retail segment, but were issued by certain of the legal entities that are now part of Brighthouse. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Overview.”

Corporate & Other

Corporate & Other contains the excess capital not allocated to the segments, the results of part of MetLife’s ancillary international operations and U.S. direct business sold directly to consumers, which were written out of our insurance entities prior to the separation, and interest expense related to the majority of our outstanding debt, as well as expenses associated with certain legal proceedings and income tax audit issues. Additionally, Corporate & Other includes certain assumed reinsurance and the elimination of intersegment amounts.

Market Environment and Opportunities

We believe the shift away from defined benefit plans and the concern over government social safety net programs, occurring at a time of significant demographic change in the United States, as baby boomers transition to retirement, present an opportunity to assist individuals in planning for their long-term financial security. We believe we are well positioned to benefit from this environment and the changes and trends affecting it, including the following:

 

  Largest individual insurance market in the world. The U.S. life insurance market has $2.7 trillion1 net assets in annuities and approximately $11.9 trillion of individual life insurance face amount in-force. This represents a large opportunity pool for the Company from which we expect to benefit because of the scale and scope of our life and annuity products, risk management and distribution capabilities, and our ability to operate nationally.

 

  Shifting of responsibility for retirement planning and life time income security from employers and other institutions to individuals. The shift away from traditional defined benefit plans, together with increased life

 

1  Insured Retirement Institute, IRI Fact Book 2016.

 



 

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expectancy, has increased the burden on individuals for retirement planning and financial security and created a significant risk that many people will outlive their retirement assets. The Employee Benefit Research Institute estimates that participation in an employment-based defined benefit plan among private sector workers declined from 38% in 1979 to 13% in 2013. Fifty-one percent of households have no retirement savings in a defined contribution plan or IRA,2 and Social Security provides an average of 40% of the retirement income of retired households.3 According to the U.S. Government Accountability Office, among the 48% of households age 55 and older with some retirement savings, the median amount is approximately $109,000.4 The individual life insurance and retirement industry has traditionally offered solutions that address this underserved need among consumers, such as annuities, which represent an alternative means of generating pension-like income to permit contract holders to secure guaranteed income for life. We believe our simplified suite of annuity products will be attractive to consumers as a supplement to Social Security or employer provided pension income.

 

  Favorable demographic trends. There are several demographic trends that we believe we can take advantage of, including:

 

    The ongoing transition of baby boomers into retirement offers opportunities for the accumulation of wealth, as well as its distribution and transfer. According to the Insured Retirement Institute, each day 10,000 Americans reach the age of 65 and this is expected to continue through at least 2030.5 One of the market segments we target, the Secure Seniors, includes individuals from the baby boomer demographic and is projected to grow by 15% between 2015 and 2025.6 See “— Our Business Strategy — Focus on target market segments.”

 

    The emergence of Generation X and Millennials as a larger and fast growing, potentially ethnically diverse segment of the U.S population. Many of these individuals are in their prime earning years and we believe they will increase their focus on savings for wealth and protection products. As Generation X and Millennials continue to age into the Middle Aged Strivers and Diverse and Protected segments that we target, we believe we have an opportunity to increase our share of the industry profit pool represented by these groups. See “— Our Business Strategy — Focus on target market segments.”

 

  Underinsured and underserved population is growing. According to a recent survey, 41% of U.S. households believe that they need more life insurance.7 Six in 10 Americans have life insurance,8 but ownership of individual coverage has declined over a 50-year period.9 We believe the products and solutions we offer will address the financial security needs of the under-insured portion of the U.S. population, which are our target segments.

 

  Regulatory changes. Regulatory and compliance requirements in the insurance and financial services industries have increased over the past several years and resulted in new regulation and enhanced supervision. For example, the DOL issued new rules on April 6, 2016 that, if not delayed or repealed, would raise the standards for sales of variable and index-linked annuities into retirement accounts to a fiduciary standard, meaning that sales must consider the customer’s interest above all factors. The DOL has released its final rule delaying the original applicable date for 60 days from April 10, 2017 to June 9, 2017. Further,

 

2  LIMRA, The Retirement Income Reference Book, 2015.
3  LIMRA, The Retirement Income Reference Book, 2015.
4  U.S. Government Accountability Office, “Retirement Security: Report to the Ranking Member, Subcommittee on Primary Health and Retirement Security, Committee on Health, Education, Labor, and Pensions, U.S. Senate,” May 2015.
5  Insured Retirement Institute, IRI Fact Book 2016.
6  MetLife Accelerating Value Consumer Survey, June 2015; Census projections.
7  LIMRA, The Facts of Life and Annuities, 2016 Update.
8  LIMRA, 2016 Insurance Barometer Study.
9  LIMRA, The Facts of Life and Annuities, 2016 Update.

 



 

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the DOL continues to seek comments until April 17, 2017 concerning questions of law and policy related to the rules. See “Regulation — Insurance Regulation — Department of Labor and ERISA Considerations.” These rules, if and when they become applicable, are expected to require meaningful changes to distribution practices and disclosures and affect sales of annuity products from providers with proprietary distribution. We believe our history of navigating a changing regulatory environment and our transition to independent distribution may present us with an opportunity to capture market share from those who are less able to adapt to changing regulatory requirements.

We believe these trends, together with our competitive strengths and strategy discussed below, provide us a unique opportunity to increase the value of our business.

Our Competitive Strengths

We believe that our large in-force book of business, strong balance sheet, risk management strategy, experienced management team and focus on expense reduction will allow us to capitalize on the attractive market environment and opportunities as we complete our separation from MetLife and develop and grow our business on an independent basis.

 

  Large in-force book of business. We are a major provider of life insurance and annuity products in the United States, with approximately 2.8 million insurance policies and annuity contracts as of December 31, 2016. We believe our size and long-standing market presence position us well for potential future growth and margin expansion following the completion of our transition to a separate company.

 

    Our size provides opportunities to achieve economies of scale, permitting us to spread our fixed general and administrative costs, including expenditures on branding, over a large revenue base, resulting in a competitive expense ratio.

 

    Our large policyholder base provides us with an opportunity to leverage underlying data to develop risk and policyholder insights as well as implement operational best practices, permitting us to effectively differentiate ourselves from our competitors with the design and management of our products.

 

    Our in-force book of business was sold by a wide range of distribution partners to whom we continue to pay trail commissions on the policies and contracts sold by them. For the year ended December 31, 2016, over 1,000 distribution firms or general agencies of our distributors received trail commissions. We believe this enhances our ability to maintain connectivity and relevance to those distributors.

 

  Strong balance sheet. As of December 31, 2016, we had total assets of $222 billion; total policyholder liabilities and other policy-related balances, including separate accounts, of $187 billion; and total shareholder’s net investment of $14.9 billion, including AOCI. Following the separation, we intend to maintain and improve the strong statutory capitalization and financial strength ratings of our insurance company subsidiaries, as well as the diversity of invested asset classes.

 

   

Our insurance company subsidiaries had combined statutory total adjusted capital (“Combined TAC”) of approximately $5.4 billion resulting in a combined company action level risk-based capital (“Combined RBC”) ratio of approximately 525% as of December 31, 2016. After giving effect to the formation of Brighthouse Reinsurance Company of Delaware (“BRCD”) and other restructuring and separation related transactions, including an expected capital contribution to Brighthouse Insurance at the time of separation, Combined TAC would have increased by approximately $2 billion in the insurance company subsidiaries, resulting in a Combined RBC ratio in excess of 700%. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Unaudited Pro Forma Condensed Combined Financial Statements.” We intend to support our variable annuity business with assets consistent with a CTE95 standard (defined as the average amount of assets required to satisfy contract holder obligations across market environments in the worst five percent of

 



 

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1,000 capital market scenarios over the life of the contracts (“CTE95”), consistent with guidelines promulgated by the National Association of Insurance Commissioners (the “NAIC”)). As of December 31, 2016, assuming the transactions to be executed in connection with the separation had occurred on such date, we estimate that we would have held approximately $2.1 billion of assets in excess of CTE95 to support our variable annuity book, which would be equivalent to holding assets at approximately a CTE98 standard as of such date (defined as the average amount of assets required to satisfy contract holder obligations across market environments in the worst two percent of 1,000 capital market scenarios over the life of the contracts (“CTE98”), consistent with guidelines promulgated by the NAIC).

 

    We have strong financial strength ratings from the rating agencies that rate us. Financial strength ratings represent the opinions of the rating agencies regarding the ability of our insurance company subsidiaries to meet their financial obligations to policyholders and contract holders and are not designed or intended for use by investors in evaluating our securities.

 

    We have a diversified, high quality investment portfolio with $80.6 billion of general account assets as of December 31, 2016, comprised of over 76% fixed maturity securities, of which over 95% were investment grade and 58% were U.S. corporate, government and agency securities.

 

    Following MetLife’s policyholder assumption review of variable annuities issued by its U.S. insurance companies we have updated our actuarial assumptions and strengthened the GAAP reserves of our insurance company subsidiaries based on a range of possible market scenarios and expected policyholder behavior.

 

  Proven risk management and capital management expertise. We will bring to Brighthouse the strong risk management culture which we inherited as part of MetLife as demonstrated by our product decisions in recent years and our focused risk and capital management strategies for our existing book of business. We believe we have initially capitalized our insurance company subsidiaries with capital which is sufficient to maintain our financial strength ratings notwithstanding modest fluctuations in equity markets and interest rates in any given period. Further, over time by increasing the proportion of non-derivative, income-generating invested assets compared to derivative instruments supporting our variable annuity book of business, we believe our capital profile will be stronger and more able to mitigate a broader range of risk exposures.

 

  Experienced senior management team with a proven track record of execution including producing cost savings. Our senior management team has an average of 20 years of insurance industry experience. They have worked together to manage our business and reduce the cost base prior to this distribution and will continue to manage our business as a separate and focused individual life insurance and annuity company. The senior management team has taken significant actions over the last four years, including the following:

 

    In 2012, MetLife announced a multi-year $1 billion gross expense savings initiative, which was substantially completed in 2015. This management team delivered approximately $200 million of expense savings with respect to MetLife’s former Retail segment under that initiative.

 

    The merger of three affiliated life insurance companies and a former offshore, reinsurance company affiliate that mainly reinsured guarantees associated with variable annuity products issued by MetLife affiliates to form our largest operating subsidiary, Brighthouse Insurance.

 

    The consolidation of MetLife’s former Retail segment in Charlotte, North Carolina, which, in addition to generating expense savings noted above, permitted our management to work together collaboratively at the same geographic location.

 

   

The sale of MetLife’s former Retail segment’s proprietary distribution channel, MetLife Premier Client Group (“MPCG”), to Massachusetts Mutual Life Insurance Company (“MassMutual”), completing our transition to a more efficient acquisition cost distribution model through independent, third-party

 



 

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channel partners. As part of the sale, MetLife reduced its former Retail segment employee base by approximately 3,900 advisors and over 2,000 support employees, which we estimate will result in a net reduction in our annual expenses of approximately $125 million. The sale of the proprietary distribution channel will also enable us to pursue a simplified, capital efficient product suite and reduce our fixed expense structure.

 

    On July 31, 2016, MetLife entered into a multi-year outsourcing arrangement for the administration of certain in-force policies currently housed on up to 20 systems. Pursuant to this arrangement, at least 13 of such systems will be consolidated down to one. We expect this arrangement to result in a phased net reduction in our overall expenses for policyholder and contract holder maintenance over the next three to five years. We intend to pursue similar opportunities to take advantage of technology and systems improvements and flexible, modular operating models to reduce costs.

Summary Risk Factors

Our business generally and the separation and distribution in particular is subject to a number of risks that could materially and adversely affect our financial condition and results of operations. The following high-level summary of these risks is not exhaustive and should be read in conjunction with the information in the section captioned “Risk Factors,” for a more thorough description of these and other risks, and the other sections of this information statement.

 

  Risks related to the separation and distribution

 

    MetLife’s plan to separate into two independent publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

 

    Our separation from MetLife could adversely affect our business and profitability due to MetLife’s strong brand and reputation.

 

    The terms of our arrangements with MetLife may be more favorable than we would be able to obtain from an unaffiliated third party and we may be unable to replace the services MetLife provides to us in a timely manner or on comparable terms.

 

    After the distribution, we will have a very large number of shareholders which may impact the efficacy of shareholder votes and will result in increased costs.

 

    We have no history of operating as an independent company and we expect to incur increased administrative and other costs following the separation by virtue of our status as an independent public company. Our historical combined financial data are not necessarily representative of the results we would have achieved as a separate company and may not be a reliable indicator of our future results.

 

    If the distribution were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then MetLife, we and our shareholders could be subject to significant tax liabilities.

 

    We may be unable to achieve some or all of the benefits that we expect to achieve from the separation and the cost of achieving such benefits may be more than we estimated.

 

    We will incur substantial indebtedness in connection with the separation, and the degree to which we will be leveraged following completion of the distribution and separation may materially and adversely affect our results of operations and financial condition.

 

    After the distribution, certain of our directors and officers may have actual or potential conflicts of interest because of their MetLife equity ownership or their former MetLife positions.

 



 

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  Risks related to our business

 

    Differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models may adversely affect our financial results, capitalization and financial condition.

 

    Guarantees within certain of our products may decrease our earnings, decrease our capitalization, increase the volatility of our results, result in higher risk management costs and expose us to increased counterparty risk.

 

    Our proposed variable annuity exposure management strategy may not be fully implemented prior to the distribution, may not be effective, may result in net income volatility and may negatively affect our statutory capital. Our proposed ULSG asset requirement target may not ensure we have sufficient assets to meet our future ULSG policyholder obligations and may result in net income volatility.

 

    We may be required to hold additional statutory reserves against our variable annuities as a result of AG 43, which could impair our ability to make distributions to our shareholders.

 

    A sustained period of low equity market prices and interest rates that are lower than those we assumed when we issued our variable annuity products, could have a material adverse effect on our results of operations, capitalization and financial condition.

 

    Elements of our business strategy are new and may not be effective in accomplishing our objectives.

 

    A downgrade or a potential downgrade in our financial strength ratings, which are important to maintaining public confidence in our products and our competitive condition, could result in a loss of business and materially adversely affect our financial condition and results of operations.

 

    Reinsurance may not be available, affordable or adequate to protect us against losses. If the counterparties to our reinsurance or indemnification arrangements or to the derivatives we use to hedge our business risks default or fail to perform, we may be exposed to risks we had sought to mitigate, which could materially adversely affect our financial condition and results of operations.

 

    We may not be able to take credit for reinsurance, our statutory life insurance reserve financings may be subject to cost increases, new financings may be subject to limited market capacity and we may be unable to successfully complete the restructuring of existing affiliated reinsurance companies and financing facilities into a single reinsurance subsidiary with its own financing.

 

    Factors affecting our competitiveness may adversely affect our market share and profitability.

 

    The failure of third parties to provide various services that are important to our operations could have a material adverse effect on our business.

 

    If difficult conditions in the capital markets and the U.S. economy generally persist or are perceived to persist, they may materially adversely affect our business and results of operations. Adverse capital and credit market conditions may significantly affect our ability to meet liquidity needs and our access to capital. We are exposed to significant financial and capital markets risks which may adversely affect our results of operations, financial condition and liquidity, and may cause our net investment income and net income to vary from period to period.

 

    Our insurance businesses are highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth. A decrease in the risk-based capital (“RBC”) ratio (as a result of a reduction in statutory surplus and/or increase in RBC requirements) of our insurance subsidiaries could result in increased scrutiny by insurance regulators and rating agencies and have a material adverse effect on our results of operations and financial condition.

 

   

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broker-dealer; failure to comply with those laws, including a failure to have a registered broker-dealer, or changes in those laws may have a material adverse effect on our operations and our profitability.

 

    Litigation and regulatory investigations are increasingly common in our businesses and may result in significant financial losses and/or harm to our reputation.

 

    As a holding company, Brighthouse Financial, Inc. will depend on the ability of its subsidiaries to pay dividends. We cannot assure you that we will pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.

 

    Changes in accounting standards issued by the Financial Accounting Standards Board (“FASB”) or other standard-setting bodies may adversely affect our financial statements.

Our Business Strategy

Our objective is to leverage our competitive strengths, to distinguish ourselves in the individual life insurance and annuity markets and over time increase the amount of statutory distributable cash generated by our business. We will seek to achieve this by being a focused product manufacturer with an emphasis on independent distribution, while having a competitive expense ratio relative to our competitors. We intend to achieve our goals by executing on the following strategies:

 

    Focus on target market segments. We intend to focus our sales and marketing efforts on those specific market segments where we believe we will best be able to sell products capable of producing attractive long-term value to our shareholders.

In 2015 we conducted a survey of 7,000 U.S. customers with the goal of understanding our different market segments. Ultimately, the study revealed seven distinct segments based on both traditional demographic information including socio-economic information and an analysis of customer needs, attitudes and behaviors. Our review of the customer segmentation data resulted in our focusing product design and marketing on the following target customer segments:

 

    Secure Seniors. This segment represents approximately 15% of the current U.S. population. Because the customer segments are designed to reflect attitudes and behaviors, in addition to other factors, this segment includes a broad range in age, but is composed primarily of individuals between the ages of 55 to 70 about to retire or already in retirement, of which a majority have investible assets of greater than $500,000. Secure Seniors have higher net worth relative to the other customer segments and exhibit a strong desire to work with financial advisors. The larger share of assets, relative to the other segments, may make Secure Seniors an attractive market for financial security products and solutions.

 

    Middle Aged Strivers. This segment represents approximately 23% of the current U.S. population and is the largest customer segment of those identified by our survey. There is more diversity in this segment compared to the Secure Seniors in terms of amount of investible assets, age, life stage and potential lifetime value to us. The study indicates that these individuals tend to be in the early to later stages of family formation. Almost half of the population in this segment is between the ages of 40 and 55. They are focused on certain core needs, such as paying bills, reducing debt and protecting family wealth. We believe Middle Aged Strivers are an attractive market for protection products and many of these individuals will graduate to wealth and retirement products in their later years.

 

   

Diverse and Protected. This is the most diverse segment of the population, but is also the smallest constituting only 8% of the current U.S. population. While this segment has lower income and investible assets than Secure Seniors and Middle Aged Strivers, our study indicates that they are active purchasers of insurance products. We believe that a portion of this segment, as

 



 

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they become older and more affluent, may purchase our annuity products in addition to our insurance products.

We believe that these three customer segments represent a significant portion of the market opportunity, and by focusing our product development and marketing efforts to meeting the needs of these segments we will be able to offer a targeted set of products which will benefit our expense ratio thereby increasing our profitability. Our study also indicates that Secure Seniors, Middle Aged Strivers and Diverse and Protected customer segments are open to financial guidance and, accordingly, will be receptive to the products we intend to sell and we can share our insights about these segments to our distribution partners to increase the targeting efficiency of our sales efforts with them.

 

  Focused manufacturer, with a simpler product suite designed to meet our customers’ and distributors’ needs. We intend to be financially disciplined in terms of the number of products which we offer and their risk-adjusted return profile, while being responsive to the needs of our customers and distribution partners.

 

    We seek to manage our existing book of annuity business to mitigate the effects of severe market downturns and other economic effects on our statutory capital while preserving the ability to benefit from positive changes in equity markets and interest rates through our selection of derivative instruments.

 

    We intend to offer products designed to produce statutory distributable cash flows on a more accelerated basis than those of some of our legacy in-force products. We will also focus on offering products which are more capital efficient with lower RBC requirements than our pre-2013 generation of products. Our product design and sales strategies will focus on achieving long-term risk-adjusted distributable cash flows, rather than generating sales volumes or purchasing market share. We believe this approach aligns well with long-term value creation for our shareholders.

 

    Shield Level Selector and our latest generation life insurance products, represent examples of products which we believe are responsive to our customers’ and distributors’ needs while allowing us to generate statutory distributable cash flows on a more accelerated basis than our pre-2013 generation of products. Shield Level Selector is an individual-customer, single-premium, deferred index-linked annuity that provides contract holders with a specified level of market downside protection, sharing the balance of market downside risk with the contract holder, along with offering the contract holder tax-deferred accumulation. In addition, we believe Shield Level Selector permits us to more effectively manage the market risk exposure inherent in our variable annuities with living benefit riders. Since its state-by-state phased introduction beginning in 2013, Shield Level Selector has received positive market acceptance and has been a meaningful contributor to our sales. In addition, a recent example of our latest generation life insurance products is a universal life policy with levelized commissions over time and no secondary guarantees. We expect these products to produce attractive risk-adjusted margins and product level cash flows.

 

  Independent distribution with enhanced support and collaboration with key distributors. We believe that the completion of our transition from a captive sales force to an independent and diverse distribution network will enhance our distribution focus and improve our profitability and capital efficiency.

 

    We have proactively chosen to focus on independent distribution, which we believe aligns with our focus on product manufacturing. We believe distributing our products through only the independent distribution channel will enhance our ability to control our fixed costs, target our resources more appropriately and increase our profitability because we will be better able to leverage our product development and wholesale distribution capabilities.

 

   

Since 2001 we have successfully built third-party distribution relationships. Following the sale of MPCG to MassMutual, we are dedicated to supporting and expanding these relationships. These relationships have been strengthened by a focus on fulfilling customer needs and better alignment with

 



 

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our distribution partners on product development and sales support. We therefore seek to become a leading provider of insurance and annuity products for our leading distribution partners by leveraging our marketing strengths which include customer segmentation, distribution servicing and sales support as well as our product management competencies. We believe that our distribution strategy will result in deeper relationships with these distribution partners.

 

    We will also pursue a collaborative approach with key distributors and leverage our product design expertise to seek to provide white label type product arrangements for their distribution systems. An example of this collaborative approach is the recent agreement with MassMutual pursuant to which we are exploring the joint development of certain annuity products that may be distributed through the thousands of agents in the MassMutual career agency channel, including agents formerly affiliated with MetLife.

 

  Maintain strong statutory capitalization through an exposure management program intended to be effective across market environments.

 

    The principal objective of our exposure management programs is to manage the risk to our statutory capitalization resulting from changes to equity markets and interest rates. This permits us to focus on the management of the long-term statutory distributable cash flow profile of our business and the underlying long-term returns of our product guarantees. See “Business — Description of our Segments, Products and Operations — Variable Annuity Risk Management.”

 

    Our variable annuity exposure management program has four components:

 

    We intend to support our variable annuities with assets consistent with those required at a CTE95 standard. As of December 31, 2016, assuming the transactions to be executed in connection with the separation had occurred as of such date, we estimate that we would have held approximately $2.1 billion in assets in excess of CTE95, which would be equivalent to holding assets at approximately a CTE98 standard as of such date. We believe these excess assets will permit us to absorb modest losses, which may be temporary, from changes in equity markets and interest rates without adversely affecting our financial strength ratings.

 

    We will continue to enter into derivative instruments to offset the impact on our statutory capital from more significant changes to equity markets and interest rates.

 

    We believe the earnings from our large and seasoned block of in-force business will provide an additional means of increasing and regenerating our statutory capital organically to the extent it has been eroded due to periodic changes in equity markets and interest rates.

 

    We intend to invest a portion of the assets supporting our variable annuity asset requirements in income-generating investments, which we believe will provide an additional means to increase or regenerate our statutory capital.

 

    We have a large in-force block of life insurance policies and annuity contracts that we intend to more actively manage to improve profitability, prudently minimize exposures, grow cash margins and release capital for shareholders in the medium to long-term.

 

  Focus on operating cost and flexibility. A key element of our strategy is to leverage our infrastructure over time to be a lean, flexible cost competitive operator.

 

    We will continue our focus on reducing our cost base while maintaining strong service levels for our policyholders and contract holders. As part of separating our business processes and systems from MetLife, we are taking a phased approach to re-engineering our processes and systems across all functional areas. This phased transition is expected to occur through 2020. We are planning on run-rate operating cost reductions as part of this initiative. See “Business — Select Financial Targets.”

 

   

We have identified and are actively pursuing several initiatives that we expect will make our business less complex, more flexible and better able to adapt to changing market conditions. Consistent with this

 



 

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strategy, MetLife recently sold MPCG to MassMutual, completing our transition to a more efficient acquisition cost distribution model and reducing its former Retail segment employee base by approximately 5,900 employees.

 

    We intend to leverage emerging technology and outsourcing arrangements to become more profitable. An example of this is our senior management team’s recent agreement to outsource the administration of certain in-force policies housed on up to 20 systems. Pursuant to this arrangement at least 13 of such systems will be consolidated down to one.

Select Financial Targets

We intend to manage our businesses with a focus on statutory financial results in order to improve cash flow, allowing us to reinvest in our businesses and distribute cash to shareholders over time. We have established targets for select financial metrics that we believe best measure the execution of our business strategy and align with our shareholders’ interests. It is our goal to achieve or surpass the following targets:

 

    Cash flow to shareholders: 50-70%+ of operating earnings by approximately 2020;

 

    Growth in operating earnings per share (EPS): Mid- to high- single digit annual growth; and

 

    Operating return on equity (ROE): Approximately 9%.

These targets assume our baseline business plan scenario, which we refer to as our “Base Case Scenario.” Our Base Case Scenario assumes 6.5% annual separate account returns, the 10 year U.S. Treasury rate rising ratably over 10 years to 4.25% and our current best estimate actuarial assumptions. Actual results related to these targets may vary depending on various factors, including actual capital market outcomes, changes in actuarial models or emergence of actual experience, as well as the other risks and factors discussed in “Business — Select Financial Targets,” “Note Regarding Forward-Looking Statements” and “Risk Factors.” Operating EPS and Operating ROE are performance measures that are not based on GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP and Other Financial Disclosures” and “Business — Select Financial Targets” for definitions of and further information on these measures and cash flow to shareholders.

Our Corporate Information

Prior to the distribution, we have been a wholly owned subsidiary of MetLife, Inc., a global provider of life insurance, annuities, employee benefits and asset management. Brighthouse is a holding company incorporated in Delaware on August 1, 2016.

Our principal executive office is located at the Gragg Building, 11225 North Community House Road, Charlotte, North Carolina 28277 and our telephone number is [●]. Our website address is www.brighthousefinancial.com. The information contained on, or that can be accessed through, our website is not part of, and is not incorporated into, this information statement.

 



 

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We operate our businesses through a number of direct and indirect subsidiaries. The following organizational chart presents the ownership of our principal subsidiaries following the distribution:

LOGO

The Distribution

Overview

To effect the separation, first, MetLife will undertake the restructuring described under “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions — Agreements Between Us and MetLife — Master Separation Agreement.” Following the restructuring, MetLife, Inc. will distribute at least 80.1% of Brighthouse’s common stock to MetLife’s shareholders, and Brighthouse will become a separate, publicly traded company.

Prior to the distribution, we intend to enter into a Master Separation Agreement and several other agreements with MetLife related to the distribution. These agreements will govern the relationship between MetLife and us up to and after completion of the distribution and allocate between MetLife and us various assets, liabilities, rights and obligations, including employee benefits, intellectual property and tax-related assets and liabilities. See “Certain Relationships and Related Person Transactions” for more detail.

In addition, we will incur substantial indebtedness in connection with the separation, and we will use a significant portion of the proceeds of this indebtedness to make a distribution to MetLife as partial consideration for MetLife’s transfer of assets to Brighthouse. The amount of indebtedness will allow us to achieve the following goals at the time of the distribution: (i) adequate liquidity at the Brighthouse holding company level;

 



 

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(ii) a debt-to-capital ratio of approximately 25%; and (iii) $2.0 billion to $3.0 billion of assets in excess of CTE95 to support our variable annuity contracts.

The distribution described in this information statement is subject to the satisfaction or waiver of a number of conditions. In addition, MetLife has the right not to complete the distribution if, at any time, MetLife’s board of directors (the “MetLife Board”) determines, in its sole and absolute discretion, that the distribution is not in the best interests of MetLife or its shareholders or is otherwise not advisable. See “The Separation and Distribution — Conditions to the Distribution” for more detail.

Questions and answers about the distribution

The following provides only a summary of the terms of the distribution. You should read the section entitled “The Separation and Distribution” in this information statement for a more detailed description of the matters described below.

Q: Why am I receiving this information statement?

A: MetLife is delivering this document to you because you were a holder of MetLife common stock on the record date for the distribution of shares of our common stock. Accordingly, you are entitled to receive [●] shares of our common stock for every [●] shares of MetLife common stock that you held on the record date. No action is required for you to participate in the distribution.

Q: What is the distribution?

A: The distribution is the method by which we will separate from MetLife. In the distribution, MetLife will distribute to its shareholders at least 80.1% of the shares of our common stock. Following the distribution, we will be separate from MetLife and publicly traded. MetLife will retain no more than 19.9% ownership interest in us.

Q: What will be the relationship between MetLife and Brighthouse after the distribution?

A: MetLife and Brighthouse will each be separate, publicly traded companies. MetLife and Brighthouse are entering into several agreements to govern their relationship after separation. See “Certain Relationships and Related Person Transactions — Relationship with MetLife Following the Separation.”

Q: Will the number of MetLife shares I own change as a result of the distribution?

A: No, the number of shares of MetLife common stock you own will not change as a result of the distribution.

Q: What are the motivations for the separation?

A: The separation is motivated in whole or in substantial part by the following corporate business purposes:

 

    To facilitate investors’ ability to independently value Brighthouse and MetLife based on their respective operational and financial characteristics.

 

    To enable MetLife to address certain regulatory issues, including MetLife’s potential redesignation as a non-bank systemically important financial institution, as well as the DOL Fiduciary Rule.

 

    To increase the predictability of distributable cash flows for MetLife over time as part of MetLife’s Accelerating Value strategic initiative and allow Brighthouse to make the necessary decisions and investments to serve the U.S. retail marketplace.

 



 

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    To enable Brighthouse to take advantage of a retail dedicated platform to increase responsiveness to the needs of our customers and distribution partners.

Q: Why is the separation of Brighthouse structured as a spin-off?

A: MetLife believes that a distribution of our shares is the most efficient way to separate our business from MetLife in a manner that will achieve the above objectives and permit MetLife’s shareholders to make their own investment decisions going forward as to whether or not they wish to retain their exposure to the retail life and annuity business, independent of their exposure to the continuing operations of MetLife.

Q: What is being distributed in the distribution?

A: MetLife will distribute approximately [●] shares of our common stock in the distribution, based on the approximately [●] shares of MetLife common stock outstanding as of [●], 2017. The actual number of shares of our common stock that MetLife will distribute will depend on the number of shares of MetLife common stock outstanding on the record date. For more information on the shares being distributed in the distribution, see “Description of Capital Stock — Authorized Capital Stock — Common Stock.”

Q: What will I receive in the distribution?

A: As a holder of MetLife common stock, you will receive [●] shares of our common stock for every [●] shares of MetLife common stock you hold on the record date. The distribution agent will distribute only whole shares of our common stock in the distribution. See “— How will fractional shares be treated in the distribution?” for more information on the treatment of the fractional shares you would otherwise have been entitled to receive in the distribution. Your proportionate interest in MetLife will not change as a result of the distribution. For a more detailed description, see “The Separation and Distribution — Treatment of Fractional Shares.”

Q: What is the record date for the distribution?

A: MetLife will determine record ownership as of the close of business on [●], 2017 (the “record date”).

Q: When will the distribution occur?

A: The distribution will be effective as of 5:00 p.m., New York City time, on [●], 2017 (the “distribution date”). On or shortly after the distribution date, the whole shares of our common stock will be credited in book-entry accounts for shareholders entitled to receive the shares in the distribution. We expect the distribution agent to distribute promptly to MetLife shareholders any cash in lieu of the fractional shares they would otherwise have been entitled to receive. Trust beneficiaries of the trust established under the plan of reorganization of MLIC (the “MetLife Policyholder Trust”) will receive their shares in the distribution and cash in lieu of any fractional shares from the custodian of the MetLife Policyholder Trust in accordance with the terms of the trust agreement. See “— How will MetLife distribute shares of our common stock?” for more information on how to access your book-entry account or your bank, brokerage or other account holding the Brighthouse common stock you receive in the distribution.

Q: Can MetLife decide to cancel the distribution of Brighthouse common stock, even if all the conditions have been satisfied?

A: Yes. Until the distribution has occurred, the MetLife Board has the right, in its sole discretion, to terminate the distribution, even if all the conditions have been satisfied. See “The Separation and the Distribution — Conditions to the Distribution” included elsewhere in this information statement.

 



 

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Q: How will MetLife vote any shares of our common stock it retains?

A: MetLife has agreed to vote any shares of our common stock that it retains in proportion to the votes cast by our other shareholders and will grant us a proxy with respect to such shares. For additional information on these voting arrangements, see “Certain Relationships and Related Person Transactions — Relationship with MetLife Following the Separation.”

Q: What does MetLife intend to do with any shares of our common stock it retains?

A: MetLife currently plans to dispose of all of our shares as soon as practicable following the distribution, but in no event later than five years after the distribution, while seeking to maximize overall value to its shareholders, pursuant to a dividend distribution or one or more public offerings of its remaining shares of our common stock or an offer to the MetLife shareholders to exchange all or a portion of their MetLife shares for Brighthouse shares.

Q: What do I have to do to participate in the distribution?

A: You are not required to take any action, but we urge you to read this document carefully. Shareholders of MetLife common stock on the record date will not need to pay any cash or deliver any other consideration, including any shares of MetLife common stock, in order to receive shares of our common stock in the distribution. In addition, no shareholder approval of the distribution is required. We are not asking you for a vote and are not requesting that you send us a proxy card.

Q: If I sell my shares of MetLife common stock on or before the distribution date, will I still be entitled to receive shares of Brighthouse common stock in the distribution?

A: If you hold shares of MetLife common stock on the record date and decide to sell them on or before the distribution date, you may choose to sell your MetLife common stock with or without your entitlement to our common stock. You should discuss these alternatives with your bank, broker or other nominee. See “The Separation and Distribution — Trading Prior to the Distribution Date” for more information.

Q: How will MetLife distribute shares of our common stock?

A: Registered shareholders: If you are a registered shareholder (meaning you hold physical MetLife stock certificates or you own your shares of MetLife common stock directly through an account with MetLife’s transfer agent, Computershare Inc.), our transfer agent will credit the whole shares of our common stock you receive in the distribution by way of direct registration in book-entry form under the Direct Registration System (the “DRS”) to your DRS book-entry account on or shortly after the distribution date. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to shareholders, as is the case in the distribution. The transfer agent will keep a record of your shares of common stock on our record of owners. You will be able to access information regarding your DRS account holding the Brighthouse shares at [●] using the following website [●] or via our transfer agent’s interactive voice response system at [●]. If you are entitled to receive whole shares of our common stock in the distribution, promptly after the distribution date, the distribution agent will mail you a DRS account statement that reflects the number of whole shares of our common stock you own, along with a check for any cash in lieu of fractional shares you would otherwise have been entitled to receive.

Street name” or beneficial shareholders: If you own your shares of MetLife common stock beneficially through a bank, broker or other nominee, the bank, broker or other nominee holds the shares in “street name” and records your ownership on its books. In this case, your bank, broker or other nominee will credit your account with the whole shares of our common stock you receive in the distribution on or shortly after the distribution date. Please contact your bank, broker or other nominee for further information about your account.

 



 

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Trust beneficiaries: If you are a beneficiary of the MetLife Policyholder Trust established in connection with the demutualization of MLIC in April 2000, the trustee of the MetLife Policyholder Trust is the record owner of the shares of MetLife common stock to which you are beneficially entitled consistent with your beneficial interests, or “trust interests,” in the MetLife Policyholder Trust. In this case, the trustee will transfer any whole shares of our common stock you receive in the distribution to the custodian of the MetLife Policyholder Trust, which in turn will transfer shares to our transfer agent. The transfer agent will issue such shares electronically to you by way of direct registration in book-entry form under the DRS. Registration in book-entry form refers to a method of recording share ownership where no physical stock certificates are issued to shareholders, as is the case in the distribution. The transfer agent will keep a record of your shares of our common stock on our record of owners. You will be able to access information regarding your DRS account holding the Brighthouse shares at [●] using the following website [●] or via our transfer agent’s interactive voice response system at [●]. If you are entitled to receive whole shares of our common stock in the distribution, promptly after the distribution date, the distribution agent will mail to you a DRS account statement. The DRS account statement will indicate the number of whole shares of our common stock that have been registered in book-entry form under the DRS in your name, and will be accompanied by a check for any cash in lieu of any fractional shares you would otherwise have been entitled to receive.

The distribution agent will distribute only whole shares of our common stock. See “— How will fractional shares be treated in the distribution?” for more information about the treatment of fractional shares you would otherwise have been entitled to receive in the distribution.

We will not issue any physical stock certificates to any shareholders, even if requested. See “The Separation and Distribution — When and how you will Receive Brighthouse Shares” for a more detailed explanation.

Q: How will fractional shares be treated in the distribution?

A: The distribution agent will not distribute any fractional shares of our common stock to you in connection with the distribution. Instead, the distribution agent will aggregate all fractional shares into whole shares and sell, or cause to be sold, the whole shares in the open market at prevailing market prices on behalf of MetLife shareholders entitled to receive fractional shares. The distribution agent will then distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata, to these holders (net of any required withholding for taxes applicable to each holder). We anticipate that the distribution agent will sell, or cause to be sold, these aggregated fractional shares commencing on the first trading day after the distribution date. See “The Separation and Distribution — Treatment of Fractional Shares” for a more detailed explanation of the treatment of fractional shares.

Q: What are the U.S. federal income tax consequences of the distribution to me?

A: The distribution is conditioned on the receipt and continued validity of (i) a private letter ruling from the U.S. Internal Revenue Service (the “IRS”), which MetLife requested, regarding certain significant issues under the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) the receipt and continued validity of a tax opinion of a nationally recognized accounting firm (“tax counsel”) to the effect that, among other things, the distribution will qualify for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Code, except to the extent of cash received in lieu of fractional shares, each subject to the accuracy of and compliance with certain representations, assumptions and covenants.

As described more fully in “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution,” a U.S. holder (as defined in that section) generally will not recognize any gain or loss, and will not include any amount in income, for U.S. federal income tax purposes, upon receiving our common stock in the distribution, except for any gain or loss recognized with respect to cash the shareholder

 



 

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receives in lieu of fractional shares. In addition, each U.S. holder’s aggregate basis in its MetLife common stock and our common stock received in the distribution, including any fractional shares to which the U.S. holder would otherwise have been entitled, will equal the aggregate basis the U.S. holder had in its MetLife common stock immediately prior to the distribution, allocated in proportion to MetLife’s and our common stock’s fair market value at the time of the distribution. See “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution” for information regarding the determination of fair market value for purposes of allocating basis.

Tax matters are complicated. The tax consequences to you of the distribution depend on your individual situation. You should consult your own tax advisor regarding those consequences, including the applicability and effect of any U.S. federal, state and local, as well as foreign, tax laws and of changes in applicable tax laws, which may result in the distribution being taxable to you. See “Risk Factors — Risks Relating to the Distribution — If the distribution were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then MetLife, we and our shareholders could be subject to significant tax liabilities,” “Risk Factors —Risks Relating to the Distribution — We could have an indemnification obligation to MetLife if the distribution does not qualify for non-recognition treatment or if certain other steps that are part of the separation do not qualify for their intended tax treatment, which could materially adversely affect our financial condition” and “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

Q: Does Brighthouse intend to pay cash dividends?

A: As a separate company, we do not currently anticipate declaring or paying regular cash dividends on our common stock in the near term. Any future declaration and payment of dividends or other distributions of capital will be at the discretion of our Board of Directors and will depend upon our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries) and any other factors that our Board deems relevant in making such a determination. See “Dividend Policy” for more information.

Q: How will Brighthouse common stock trade?

A: Currently, there is no public market for our common stock. We have applied to list our common stock on NASDAQ under the symbol “BHF”.

We anticipate that trading in our common stock will begin on a “when-issued” basis as early as two trading days prior to the record date for the distribution and will continue up to and including the distribution date. When-issued trading in the context of a spin-off refers to a sale or purchase made conditionally on or before the distribution date because the securities of the spun-off entity have not yet been distributed. When-issued trades generally settle within four trading days after the distribution date. On the first trading day following the distribution date, any when-issued trading of our common stock will end and “regular-way” trading will begin. Regular-way trading refers to trading after the security has been distributed and typically involves a trade that settles on the third full trading day following the date of the trade. See “The Separation and Distribution —Trading Prior to the Distribution Date” for more information. We cannot predict the trading prices for our common stock before, on or after the distribution date.

Q: Will the distribution affect the trading price of my MetLife common stock?

A: Assuming no significant intervening events, we expect the trading price of shares of MetLife common stock immediately following the distribution to be lower than immediately prior to the distribution because the trading price will no longer reflect the value of Brighthouse. Furthermore, until the market has fully analyzed the value of MetLife without Brighthouse, the trading price of shares of MetLife common stock may fluctuate. There

 



 

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can be no assurance that, following the distribution, the combined trading prices of the MetLife common stock and the Brighthouse common stock will equal or exceed what the trading price of MetLife common stock would have been in the absence of the distribution.

It is possible that after the distribution, the combined equity value of MetLife and Brighthouse will be less than MetLife’s equity value before the distribution.

Q: Will my shares of MetLife common stock continue to trade following the distribution?

A: Yes. MetLife common stock will continue to be traded on the New York Stock Exchange (“NYSE”) under the symbol “MET”.

Q: Do I have appraisal rights in connection with the distribution?

A: No. Holders of MetLife common stock are not entitled to appraisal rights in connection with the distribution.

Q: Who is the transfer agent and registrar for Brighthouse common stock?

A: Following the distribution, [●] will serve as transfer agent and registrar for our common stock. In addition, [●] has the following two roles in the distribution:

 

    Computershare Inc. currently serves and will continue to serve as MetLife’s transfer agent and registrar.

 

    In addition, [●] will serve as the distribution agent in the distribution and will assist MetLife in the distribution of our common stock to MetLife’s shareholders.

Q: Are there risks associated with owning shares of Brighthouse common stock?

A: Yes. Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the separation. Following the separation, we will also face risks associated with being a separate, publicly traded company. Accordingly, you should read carefully the information set forth in the section entitled “Risk Factors” in this information statement.

Q: Where can I get more information?

A: If you have any questions relating to the mechanics of the distribution, you should contact the distribution agent at:

Before the separation, if you have any questions relating to the distribution, you should contact MetLife at:

Investor Relations

MetLife, Inc.

200 Park Avenue

New York, New York 10166-0188

Phone: (212) 578-7888

Email: john.a.hall@metlife.com

 



 

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After the distribution, if you have any questions relating to Brighthouse, you should contact us at:

Investor Relations

Brighthouse Financial, Inc.

Gragg Building, 11225 North Community House Road

Charlotte, North Carolina 28277

Phone: [●]

Email: Investor.relations@brighthousefinancial.com

After the distribution, if you have any questions relating to MetLife, you should contact MetLife at:

Investor Relations

MetLife, Inc.

200 Park Avenue

New York, New York 10166-0188

Phone: (212) 578-7888

Email: john.a.hall@metlife.com

Summary of the Distribution

 

Distributing Company

MetLife, Inc., a Delaware corporation that holds all of our common stock issued and outstanding prior to the distribution. After the distribution, MetLife will retain no more than 19.9% of our common stock.

 

Distributed Company

Brighthouse Financial, Inc., a Delaware corporation and a wholly owned subsidiary of MetLife. At the time of the distribution, we will hold, directly or through our subsidiaries, the assets and liabilities of MetLife’s Brighthouse Financial segment. See “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions” for more detail. After the distribution, we will be a separate, publicly traded company.

 

Distributed Securities

At least 80.1% of the shares of our common stock owned by MetLife. Based on the approximately [●] shares of MetLife common stock outstanding on [●], 2017, and applying the distribution ratio of [●] shares of Brighthouse common stock for every [●] shares of MetLife common stock, approximately [●] shares of Brighthouse common stock will be distributed.

 

Record Date

The record date is the close of business on [●], 2017.

 

Distribution Date

The distribution date is 5:00 p.m., New York City time, on [●], 2017.

 

Restructuring

Brighthouse will own, directly or indirectly, certain subsidiaries of MetLife including Brighthouse Insurance, Brighthouse Insurance NY, NELICO and Brighthouse Investment Advisers, LLC (“Brighthouse Advisers”), formerly known as MetLife Advisers, LLC (“MetLife Advisers”), and an affiliated reinsurance company and other entities. Prior to the distribution, these entities were, directly or indirectly, wholly owned by MetLife, Inc.

 



 

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  In order to position Brighthouse to effectively compete as a focused product manufacturer of retail life insurance and annuity products with national distribution, MetLife will undertake several actions including an internal reorganization involving its former Retail segment and certain affiliated reinsurance companies, predominantly through equity transfers, mergers and the sale or assignment of certain assets and liabilities among applicable companies within Brighthouse and MetLife, as well as the unwinding of several intercompany reinsurance transactions. The objective of these actions is to both create the desired post-distribution structure for Brighthouse as well as reduce ongoing affiliation and interdependencies between MetLife and Brighthouse.

See “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions” for a description of the restructuring.

 

Distribution Ratio

Each holder of MetLife common stock will receive [●] shares of our common stock for every [●] shares of MetLife common stock it holds on the record date. The distribution agent will distribute only whole shares of our common stock in the distribution. See “The Separation and Distribution — Treatment of Fractional Shares” for more detail. Please note that if you sell your shares of MetLife common stock on or before the distribution date, the buyer of those shares may in some circumstances be entitled to receive the shares of our common stock issuable in respect of the MetLife shares that you sold. See “The Separation and Distribution — Trading Prior to the Distribution Date” for more detail.

 

The Distribution

On the distribution date, MetLife will release the shares of our common stock to the distribution agent to distribute to MetLife shareholders. Our transfer agent will credit the whole shares of our common stock you receive in the distribution by way of direct registration in book-entry form. We will not issue any physical stock certificates. Our transfer agent, or your bank, broker or other nominee, will credit your shares of our common stock to your book-entry account, or your bank, brokerage or other account, on or shortly after the distribution date. You will not be required to make any payment, surrender or exchange your shares of MetLife common stock or take any other action to receive your shares of our common stock.

 

Fractional Shares

The distribution agent will not distribute any fractional shares of our common stock to MetLife shareholders. Instead, the distribution agent will first aggregate fractional shares into whole shares, then sell, or cause to be sold, the whole shares in the open market at prevailing market prices on behalf of MetLife shareholders who would otherwise have been entitled to receive a fractional share, and finally distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata, to these holders (net of any required withholding for taxes applicable to each holder). If you receive cash

 



 

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in lieu of fractional shares, you will not be entitled to any interest on the proceeds. Your receipt of cash in lieu of fractional shares generally will, for U.S. federal income tax purposes, be taxable as described under “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution” and “The Separation and Distribution — Treatment of Fractional Shares.”

 

Conditions to the Distribution

The distribution is subject to the satisfaction of the following conditions or the MetLife Board’s waiver of the following conditions. MetLife may waive, subject to applicable law, any of the following conditions, unless otherwise noted:

 

    the MetLife Board will, in its sole and absolute discretion, have authorized and approved (i) the restructuring (as described under “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions”), (ii) any other transfers of assets and assumptions of liabilities contemplated by the Master Separation Agreement and any related agreements and (iii) the distribution, and will not have withdrawn that authorization and approval;

 

    the MetLife Board will have declared the distribution of shares of our common stock to MetLife’s shareholders;

 

    the U.S. Securities and Exchange Commission (the “SEC”) will have declared the registration statement on Form 10, of which this information statement is a part, effective under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), no stop order suspending the effectiveness of the registration statement will be in effect, no proceedings for that purpose will be pending before or threatened by the SEC and notice of internet availability of this information statement will have been mailed to MetLife’s shareholders; MetLife may not waive this condition;

 

    NASDAQ will have accepted our common stock for listing, subject to official notice of issuance;

 

    the restructuring (as described under “Formation of Brighthouse and the Restructuring” and “Certain Relationships and Related Person Transactions”) will have been completed;

 

    the change of control of Brighthouse Insurance, NELICO and Brighthouse Insurance NY as a result of the distribution will have been approved by the insurance regulatory authorities in Delaware, Massachusetts and New York, the states of domicile of Brighthouse Insurance, NELICO and Brighthouse Insurance NY, respectively; MetLife may not waive this condition;

 

   

MetLife will have received a private letter ruling from the IRS, in form and substance satisfactory to MetLife in its sole and absolute discretion, regarding certain significant issues under the Code, subject to the accuracy of and compliance with certain

 



 

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representations, assumptions and covenants and that the private letter ruling will remain in effect as of the distribution date;

 

    MetLife will have received an opinion from tax counsel, in form and substance satisfactory to MetLife in its sole and absolute discretion, to the effect that, subject to the accuracy of and compliance with certain representations, assumptions and covenants, the distribution will qualify for non-recognition of gain or loss to MetLife and MetLife’s shareholders pursuant to Sections 355 and 361 of the Code, except to the extent of cash received in lieu of fractional shares;

 

    no order, injunction or decree that would prevent the consummation of the distribution will be threatened, pending or issued (and still in effect) by any governmental entity of competent jurisdiction, no other legal restraint or prohibition preventing the consummation of the distribution will be in effect, and no other event outside the control of MetLife will have occurred or failed to occur that would prevent the consummation of the distribution; MetLife may not waive this condition;

 

    no other events or developments will have occurred prior to the distribution that, in the judgment of the MetLife Board, would result in the distribution having a material adverse effect on MetLife or its shareholders; and

 

    MetLife and we will have executed and delivered the Master Separation Agreement, Registration Rights Agreement, Investment Management Agreements, Transition Services Agreements, Intellectual Property License Agreement, Tax Receivables Agreement, Tax Separation Agreement (each as defined herein), certain services agreements and all other ancillary agreements related to the distribution.

 

  The fulfillment of the above conditions will not create any obligation on MetLife’s part to effect the distribution. We are not aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we must obtain, other than the approval for listing of our common stock, the SEC’s declaration of the effectiveness of the registration statement, in connection with the distribution, and state insurance department approval of the separation and restructuring. MetLife has the right not to complete the distribution if, at any time, the MetLife Board determines, in its sole and absolute discretion, that the distribution is not in the best interests of MetLife or its shareholders or is otherwise not advisable.

 

Trading Market and Symbol

We have applied to list our common stock on NASDAQ under the symbol “BHF”. We anticipate that, as early as two trading days prior to the record date, trading of shares of our common stock will begin on a “when-issued” basis and will continue up to and including the distribution date, and we expect that “regular-way” trading of our

 



 

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common stock will begin the first trading day after the distribution date. We also anticipate that, as early as two trading days prior to the record date, there will be two markets in MetLife common stock: (i) a “regular-way” market on which shares of MetLife common stock will trade with an entitlement for the purchaser of MetLife common stock to shares of our common stock to be distributed in the distribution, and (ii) an “ex-distribution” market on which shares of MetLife common stock will trade without an entitlement for the purchaser of MetLife common stock to shares of our common stock to be distributed in the distribution. See “The Separation and Distribution — Trading Prior to the Distribution Date.”

 

U.S. Federal Income Tax Consequences of the Distribution

The distribution is conditioned on the receipt and continued validity as of the distribution date of a private letter ruling from the IRS, which MetLife has requested, and an opinion from tax counsel, as described above under “— Conditions to the Distribution.” As described more fully in “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution,” a U.S. holder (as defined in that section) generally will not recognize any gain or loss, and will not include any amount in income, for U.S. federal income tax purposes, upon receiving our common stock in the distribution, except for any gain or loss recognized with respect to cash the shareholder receives in lieu of fractional shares.

 

  Notwithstanding the receipt of the private letter ruling and an opinion from tax counsel, the IRS could determine that the distribution should be treated as a taxable transaction if it determines that any of the representations, assumptions or covenants on which the private letter ruling is based are untrue or have been violated or if it disagrees with the tax opinion regarding matters not covered by the private letter ruling. See “Risk Factors — Risks Relating to the Distribution — If the distribution were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then MetLife, we and our shareholders could be subject to significant tax liabilities” and “Risk Factors — Risks Relating to the Distribution — We could have an indemnification obligation to MetLife if the distribution does not qualify for non-recognition treatment or if certain other steps that are part of the separation do not qualify for their intended tax treatment, which could materially adversely affect our financial condition.”

 

  Tax matters are complicated. The tax consequences to you of the distribution depend on your individual situation. You should consult your own tax advisor as to the specific tax consequences of the distribution to you, including the effect of any U.S. federal, state, local or foreign tax laws and of changes in applicable tax laws. See “The Separation and Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

 



 

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Relationship with MetLife after the Distribution

We intend to enter into several agreements with MetLife related to the restructuring and distribution, which will govern the relationship between MetLife and us up to and after completion of the distribution and allocate between MetLife and us various assets, liabilities, rights and obligations. These agreements include:

 

    a Master Separation Agreement that will set forth MetLife’s and our agreements regarding the principal actions that we will take in connection with the distribution and aspects of our relationship following the distribution, including certain mutual rights with respect to indemnification;

 

    a Registration Rights Agreement providing MetLife with certain rights requiring us to register under the Securities Act of 1933, as amended (the “Securities Act”), the shares of our common stock held by MetLife following the distribution;

 

    a Transition Services Agreement, pursuant to which MetLife and we will provide each other specified services on a transitional basis to help ensure an orderly transition following the distribution and certain service agreements, pursuant to which MetLife and we will provide each other specified services on a go-forward basis;

 

    a Tax Receivables Agreement that provides for payments to MetLife in respect of certain tax benefits we may realize as a result of certain transactions involved in the Separation and a Tax Separation Agreement that will allocate responsibility for taxes incurred before and after the distribution and include indemnification rights with respect to tax matters and restrictions to preserve the tax-free status of the distribution; and

 

    an Intellectual Property License Agreement, and certain provisions in the Master Separation Agreement, that will provide for ownership, licensing and other arrangements to facilitate MetLife’s and our ongoing use of intellectual property.

 

  On January 1, 2017, we entered into (i) Investment Management Agreements, pursuant to which an affiliate of MetLife, MetLife Investment Advisors, LLC (“MLIA”), will manage our and our insurance company subsidiaries’ general account investment portfolio, as well as certain separate account assets of certain of our insurance company subsidiaries, including related derivatives trading, for a period following the distribution and (ii) Investment Finance Services Agreements, pursuant to which MLIA will provide certain investment finance and reporting services in respect of the assets allocated to it under the Investment Management Agreements.

 

  We describe these arrangements as well as other agreements between MetLife and us in greater detail under “Certain Relationships and Related Person Transactions,” and describe some of the risks related to these arrangements under “Risk Factors — Risks Related to Our Separation from, and Continuing Relationship with, MetLife.”

 



 

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Dividend Policy

As a separate company, we do not currently anticipate declaring or paying regular cash dividends on our common stock in the near term. Any future declaration and payment of dividends or other distributions of capital will be at the discretion of our Board of Directors and will depend upon our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries) and any other factors that our Board deems relevant in making such a determination. See “Risk Factors — Risks Relating to Our Common Stock and the Capital Markets — We do not anticipate declaring or paying regular dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock” and “Dividend Policy.”

 

Transfer Agent

[●] will serve as transfer agent for our common stock.

 

Risk Factors

Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the distribution. Following the distribution, we will also face risks associated with being a separate, publicly traded company. Accordingly, you should read carefully the information set forth under “Risk Factors.”

 



 

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Summary Historical Combined Financial Information

The following tables set forth summary historical combined financial information for the MetLife U.S. Retail Separation Business. The summary historical combined financial information as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 has been derived from the audited combined financial statements of the MetLife U.S. Retail Separation Business that are included elsewhere in this information statement and should be read in conjunction with, and is qualified by reference to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited combined financial statements and the related notes included herein. The following combined statements of operations and combined balance sheet data have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

 

     Years Ended December 31,  
     2016     2015     2014  
     (In millions)  

Statement of Operations Data

      

Total revenues

   $ 3,018     $ 8,891     $ 9,448  

Fees and other revenues

   $ 4,518     $ 4,432     $ 4,870  

Premiums

   $ 1,222     $ 1,679     $ 1,500  

Net investment income

   $ 3,207     $ 3,099     $ 3,090  

Net investment gains (losses)

   $ (78   $ 7     $ (435

Net derivative gains (losses) (1)

   $ (5,851   $ (326   $ 423  

Total expenses (2)

   $ 7,723     $ 7,429     $ 7,920  

Policyholder benefits and claims

   $ 3,903     $ 3,269     $ 3,334  

Interest credited to policyholder account balances

   $ 1,165     $ 1,259     $ 1,278  

Amortization of DAC and VOBA

   $ 371     $ 781     $ 1,109  

Other expenses

   $ 2,123     $ 2,120     $ 2,199  

Net income (loss)

   $ (2,939   $ 1,119     $ 1,159  

 



 

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     December 31,  
     2016      2015      2014  
     (In millions)  

Balance Sheet Data

        

Total assets

   $ 221,930      $ 226,725      $ 231,620  

Total investments and cash and cash equivalents

   $ 85,860      $ 85,199      $ 81,141  

Separate account assets

   $ 113,043      $ 114,447      $ 122,922  

Long-term financing obligations:

        

Debt (3)

   $ 810      $ 836      $ 928  

Reserve financing debt (4)

   $ 1,100      $ 1,100      $ 1,100  

Collateral financing arrangement (5)

   $ 2,797      $ 2,797      $ 2,797  

Policyholder liabilities (6)

   $ 73,943      $ 71,881      $ 69,992  

Variable annuities liabilities:

        

Future policy benefits

   $ 3,562      $ 2,937      $ 2,346  

Policyholder account balances

   $ 11,517      $ 7,379      $ 5,781  

Other policy-related balances

   $ 89      $ 99      $ 104  

Non-variable annuities liabilities:

        

Future policy benefits

   $ 29,810      $ 28,266      $ 27,296  

Policyholder account balances

   $ 26,009      $ 30,142      $ 31,645  

Other policy-related balances

   $ 2,956      $ 3,058      $ 2,820  

Total shareholder’s net investment

   $ 14,862      $ 16,839      $ 17,525  

Shareholder’s net investment

   $ 13,597      $ 15,316      $ 14,810  

Accumulated other comprehensive income (loss)

   $ 1,265      $ 1,523      $ 2,715  

 

(1) See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Executive Summary — Certain Business Events” for a discussion of net derivative gains (losses).
(2) Total expenses for the year ended December 31, 2016 include a goodwill impairment of $161 million.
(3) This balance includes surplus notes in aggregate principal amount of $750 million issued by Brighthouse Insurance to a financing trust. On February 10, 2017 MetLife, Inc. became the sole beneficial owner of the financing trust. In connection with the restructuring, (i) the financing trust was terminated in accordance with its terms on March 23, 2017, (ii) MetLife, Inc. became the owner of the surplus notes, and (iii) prior to the separation, MetLife, Inc. will forgive the obligation of Brighthouse Insurance to pay the principal under the surplus notes. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — The Company —Outstanding Debt and Collateral Financing Arrangement — Surplus Notes - Affiliated (Excluding Reserve Financing Surplus Notes -Affiliated).”
(4) Includes long-term financing of statutory reserves supporting level premium term life and ULSG policies provided by surplus notes issued to MetLife. These surplus notes are expected to be eliminated in connection with the restructuring of existing reserve financing arrangements. See “Formation of Brighthouse and the Restructuring — Formation of Brighthouse” and “Certain Relationships and Related Person Transactions” for a discussion of the new affiliated reinsurance structure and arrangements.
(5) Supports statutory reserves relating to level premium term and ULSG policies pursuant to credit facilities entered into by MetLife, Inc. and an unaffiliated financial institution. These facilities are expected to be replaced in connection with the restructuring of existing reserve financing arrangements. See “Formation of Brighthouse and the Restructuring — Formation of Brighthouse” and “Certain Relationships and Related Person Transactions” for a discussion of the new affiliated reinsurance structure and arrangements.
(6) Includes future policy benefits, policyholder account balances and other policy-related balances.

 



 

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RISK FACTORS

You should carefully consider all of the information in this information statement and each of the risks described below, which we believe are the principal risks that we face. Some of the risks relate to our business, others to the separation and distribution. Some risks relate principally to the securities markets and ownership of our common stock.

Any of the following risks could materially and adversely affect our business, financial condition and results of operations and the actual outcome of matters as to which forward-looking statements are made in this information statement. While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition and results of operations in the future.

Risks Related to our Business

Differences between actual experience and actuarial assumptions and the effectiveness of our actuarial models may adversely affect our financial results, capitalization and financial condition

Our earnings significantly depend upon the extent to which our actual claims experience and benefit payments on our products are consistent with the assumptions we use in setting prices for our products and establishing liabilities for future policy benefits and claims. Such amounts are established based on estimates by actuaries of how much we will need to pay for future benefits and claims. To the extent that actual claims and benefits experience is less favorable than the underlying assumptions we used in establishing such liabilities, we could be required to increase our liabilities. We make assumptions regarding policyholder behavior at the time of pricing and in selecting and utilizing the guaranteed options inherent within our products based in part upon expected persistency of the products, which change the probability that a policy or contract will remain in force from one period to the next. Persistency within our annuities business may be significantly affected by the value of guaranteed minimum benefits contained in many of our variable annuities being higher than current account values in light of poor equity market performance or extended periods of low interest rates as well as other factors. Persistency could be adversely affected generally by developments affecting policyholder perception of us, including perceptions arising from adverse publicity. The pricing of certain of our variable annuity products that contain certain living benefit guarantees is also based on assumptions about utilization rates, or the percentage of contracts that will utilize the benefit during the contract duration, including the timing of the first lifetime income withdrawal. Results may vary based on differences between actual and expected benefit utilization. A material increase in the valuation of the liability could result to the extent emerging and actual experience deviates from these policyholder option utilization assumptions, and in certain circumstances this deviation may impair our solvency.

We use actuarial models to assist us in establishing reserves for liabilities arising from our insurance policies and annuity contracts. We periodically review the effectiveness of these models, their underlying logic and assumptions and, from time to time, implement refinements to our models based on these reviews. We only implement refinements after rigorous testing and validation and, even after such validation and testing our models remain subject to inherent limitations. Accordingly, no assurances can be given as to whether or when we will implement refinements to our actuarial models, and, if implemented, the extent of such refinements. Furthermore, if implemented, any such refinements could cause us to increase the reserves we hold for our insurance policy and annuity contract liabilities which would adversely affect our risk-based capital ratio and the amount of variable annuity assets we hold in excess of CTE95 and, in the case of any material model refinements, could materially adversely affect our financial condition and results of operations.

Due to the nature of the underlying risks and the uncertainty associated with the determination of liabilities for future policy benefits and claims, we cannot determine precisely the amounts which we will ultimately pay to settle our liabilities. Such amounts may vary materially from the estimated amounts, particularly when those