EXECUTION COPY

INDEMNITY REINSURANCE AGREEMENT

Between

MADISON NATIONAL LIFE INSURANCE COMPANY, INC.

MADISON, WI

 (hereinafter referred to as the "Ceding Company")

and

GUGGENHEIM LIFE AND ANNUITY COMPANY

WILMINGTON, DE

(hereinafter referred to as the "Reinsurer")

TREATY # ______________

 

Page 1

EXECUTION COPY

TABLE OF CONTENTS

ARTICLES

I.

PREAMBLE

II.

DEFINITIONS

III.

FORM OF REINSURANCE

IV.

LIABILITY

V.

CONSIDERATIONS

VI.

ACCOUNTING AND SETTLEMENT

VII.

TERMINATION AND RECAPTURE

VIII.

INSOLVENCY

IX.

  DAC TAX

X.

POLICY ADMINISTRATION

XI.

ARBITRATION

XII.

REPRESENTATIONS AND WARRANTIES OF REINSURER

XIII.

REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY

XIV.

CONFIDENTIALITY

XV.

GENERAL PROVISIONS

XVI.

EXECUTION AND CLOSING DATE

SCHEDULES

A.

POLICIES

B.

REPORTS

C.

COMMISSIONS AND EXPENSE ALLOWANCES

D.

TRANSFERRED ASSETS

E.

NOTICES

Page 2

EXECUTION COPY

ARTICLE I

PREAMBLE

1.01   Parties to the Agreement.    This is a reinsurance agreement (the
“Agreement”) solely between Madison National Life Insurance Company, Inc. (the
“Ceding Company” having NAIC #65781), domiciled in Wisconsin and Guggenheim Life
and Annuity Company (the “Reinsurer” having NAIC #83607), domiciled in Delaware,
individually referred to as a “Party” and collectively referred to as the
“Parties”. The Agreement will be binding upon the Ceding Company and the
Reinsurer and their respective successors and assigns.

1.02   Entire Agreement.    This Agreement, together with the Assumption
Reinsurance Agreement, the Security and Collateral Agency Agreement, and the
Administrative Services Agreement (as defined herein) (collectively, the
“Transaction Documents”), including any attached schedules or exhibits to the
foregoing agreements, constitute the entire agreement between the Parties with
respect to the business described herein and supersede all prior discussions and
agreements between the Parties with respect to the subject matter of this
Agreement.  Any change or modification to this Agreement will be null and void
unless made by amendment to this Agreement and signed by both Parties.  Any such
amendment must be in the form of an addendum to this Agreement signed by both
Parties (including signatures via e-mail or facsimile), and will be regarded as
part of this Agreement, equally binding on the Parties.

1.03  Legal Relationship.    The acceptance of risks under this Agreement will
create no right or legal relationship between the Reinsurer and the owner or
beneficiary of any insurance policy or other contract of the Ceding Company.

1.04  Regulatory Review.    This Agreement shall be subject to receipt of all
applicable consents and approvals from regulatory authorities and satisfaction
of all applicable notice and other regulatory requirements imposed under
applicable laws.

Page 3

EXECUTION COPY

ARTICLE II

DEFINITIONS

2.01

Definitions.  The following terms shall have the respective meanings set forth
below throughout this Agreement:

 “Administrative Services Agreement” means the agreement dated as of May 31,
2013 between the Parties pursuant to which the Ceding Company will provide
certain administrative services to the Reinsurer with respect to the Assumed
Policies.

“Applicable Law” means any domestic or foreign federal, state or local statute,
law, ordinance or code, or any written rules, regulations or administrative
interpretations issued by any Governmental Entity pursuant to any of the
foregoing, and any order, writ, injunction, directive, judgment or decree of a
court of competent jurisdiction.

“Assumed Policies” has the meaning set forth in Section 3.04.

“Assumption Agreement” has the meaning set forth in Section 3.04.

“Business Day” means any day other than a Saturday, Sunday, a day on which
banking institutions in the State of New York are permitted or obligated to be
closed.

“Ceding Company” has the meaning set forth in the preamble.

“Closing Date” means the date this Agreement is executed as set forth in Article
XVI.

“Company” has the meaning set forth in the preamble.

“Controlled Affiliate” means an insurance company under common control with the
Reinsurer.

“Custody Account” has the meaning set forth in Section 5.08.

“Effective Date” shall mean 12:00 AM EDT on the 31st day of May 2013.

Page 4

EXECUTION COPY

“Excluded Liabilities” has the meaning set forth in Section 4.04.  

“Extra-Contractual Obligations” means all liabilities, obligations, costs,
damages and expenses, of any kind or nature, not arising under the express terms
and conditions of any Policy, whether such liabilities, obligations, costs,
damages or expenses are owing to a Policyholder, a Governmental Entity or any
other Person, including, subject to the foregoing, (a) any liability for
punitive, exemplary, consequential, incidental, special, treble, tort, bad faith
or any other form of extra-contractual damages, (b) any liability for actual
damages sustained and not awarded as a penalty or fixed in amount by statute,
(c) any liability for statutory penalties fixed in amount by statute, (d)
damages or claims in excess of the applicable policy limits of the Policies, (e)
statutory or regulatory damages, fines, penalties, forfeitures and similar
charges of a penal or disciplinary nature, (f) attorney’s fees and all other
payments to Persons associated with investigation, litigation and settlement of
claims, as distinguished from the amount of a claimant’s recovery under a
Policy, and (g) liabilities and obligations arising out of any act, error or
omission, whether or not intentional, willful, negligent, reckless, careless, in
bad faith or otherwise, including any act, error or omission relating to (i) the
form, marketing, production, issuance, sale, cancellation or administration of
the Policies or (ii) the failure to pay or the delay in payment of claims,
benefits, disbursements or any other amounts due or alleged to be due under or
in connection with the Policies. 

For the avoidance of doubt, any liabilities, obligations, costs, damages and
expenses relating to any change in the express terms and conditions of the
Policies arising out of or resulting from any claim, litigation, arbitration,
settlement, judgment or order will be deemed Extra-Contractual Obligations.   

“Governmental Entity” means any federal, state, local, municipal, county,
foreign or other governmental, quasi-governmental, administrative or regulatory
authority, body, agency, court, tribunal, commission or other similar
governmental entity (including any branch, department, agency or political
subdivision thereof) or any self-regulating body of similar standing.

Page 5

EXECUTION COPY

“Initial Ceding Commission” shall mean an amount equal to $950,000, payable from
the Reinsurer to the Ceding Company pursuant to Section 5.01.  

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

“Person” means any individual, corporation, partnership, limited liability
company, limited liability partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization, governmental, judicial
or regulatory body, business unit, division or other entity of any kind or
nature.

“Policies” means the insurance contracts or riders originally issued, assumed or
reinsured by the Ceding Company as of the Effective Date as identified in
Schedule A, including any contracts issued upon the annuitization of a Policy
subsequent to the Effective Date (such listed policies, the "Policy” or
“Policies"). Policies shall include any related binders, certificates,
endorsements, riders, and agreements in connection therewith (collectively, the
“Endorsements”), whether filed or unfiled with the required Insurance
Departments, but only to the extent that (i) such unfiled Endorsements (1) have
been issued strictly as a clerical, not a substantive matter, (2) would be
permitted by the applicable Insurance Department without prior approval or
non-objection, and (3) are not in response to any claim, litigation,
arbitration, settlement, judgment, or order and (ii) such filed Endorsements
which are substantive or responsive to any claim, litigation, arbitration,
settlement, judgment, or order, have been identified by the Ceding Company and
approved in writing by the Reinsurer.  

“Policyholder” means the owner of a Policy.

“Quota Share”  means 100%.

“Reinsured Liabilities” means the total death, surrender, annuity or other
benefits incurred by the Company under the express terms of the Policies from
and after the Effective Date.  For the avoidance of doubt, Reinsured Liabilities
does not include any Excluded Liabilities.

“Reinsurer” has the meaning set forth in the preamble.  

Page 6

EXECUTION COPY

“Reserves”, as of any date, shall mean the gross statutory reserves, as
presented in Exhibit 5 and Exhibit 7 of the NAIC Convention Blank, net of any
Third Party Reinsurance Agreements, that would have been required under
Wisconsin regulation and in accordance with accepted actuarial industry practice
on the Policies had this Agreement not have been placed in effect, all as
determined by the Ceding Company in its reasonable discretion.

“Security and Collateral Agency Agreement” means the agreement dated as of May
31, 2013 between the Parties pursuant to which the Reinsurer will secure its
obligations under this Agreement.

“Settlement Date” means the date which is no more than five (5) Business Days
following the immediately preceding Settlement Reporting Date.  

“Settlement Reporting Date” means the date which is no more than ten (10)
Business Days following the last day of each calendar month.  

“Third Party Reinsurance Agreements” means the reinsurance agreement(s) listed
on Schedule F.

ARTICLE III

Form of Reinsurance

3.01

Form.  Subject to the terms and conditions set forth in this Agreement, the
Ceding Company herby cedes and the Reinsurer hereby reinsures, on an indemnity
coinsurance basis, the Quota Share of the Reinsured Liabilities of the Ceding
Company.  The obligations of the Reinsurer shall be subject to the same terms
and conditions as provided in the Policies between the Ceding Company and the
Policyholders. A Party shall have no other recourse against the other Party for
payments other than those amounts specifically allowed for herein.

3.02

Licensing and Compliance Requirements. This Agreement applies only to Policies
issued in a jurisdiction in which the Ceding Company is properly licensed.   In

Page 7

EXECUTION COPY

the event that the Ceding Company is found to be in non-compliance with any
Applicable Law material to this Agreement, but unrelated to proper licensing,
the Agreement will remain in effect and the Ceding Company will defend,
indemnify and hold harmless the Reinsurer for any loss the Reinsurer suffers as
a result of the non-compliance, and will seek to remedy the non-compliance.  The
Ceding Company shall notify the Reinsurer in writing within ten (10) Business
Days after receipt of notice of any non-compliance related to a Policy arising
from an audit or review of any Governmental Entity, and will provide the
Reinsurer an opportunity to review any response before it is submitted to the
Governmental Entity.

3.03

Net Retained Lines.  This Agreement applies only to that portion of any
reinsurance which the Ceding Company retains net for its own account.  The
amount of the Reinsurer’s liability hereunder in respect of any loss or losses
shall not be increased by reason of the inability of the Ceding Company to
collect from a Third Party Reinsurance Agreement, whether specific or general,
any amounts which may have become due from such Third Party Reinsurance
Agreement, whether such inability arises from the insolvency of the reinsurer(s)
or otherwise.

3.04 Potential Assumption.  The Reinsurer and the Ceding Company have,
contemporaneously with this Agreement, entered into an Assumption Reinsurance
Agreement (the “Assumption Agreement”) in respect of certain Policies.  All
assumptions thereunder shall be subject to receipt of all applicable consents
and approvals from regulatory authorities and other applicable parties and
satisfaction of all applicable notice and other regulatory requirements imposed
under applicable laws in accordance with the Assumption Agreement. Any Policies
so assumed are referred to herein as “Assumed Policies,” and shall, effective
with their assumption under the Assumption Agreement, cease to be subject to
this Agreement except as otherwise provided for herein.  The Ceding Company
shall use commercially reasonable efforts to add the Reinsurer as a reinsured
party under the Third Party Reinsurance Agreements that include Assumed
Policies, or assign its rights with respect to Assumed Policies under those
agreements to Reinsurer, so as to continue coverage under the Third Party
Reinsurance Agreements for the Assumed Policies.  

Page 8

EXECUTION COPY

Article 4

Liability

4.01

Effectiveness.   Subject to the terms and conditions set forth in this
Agreement, Reinsurer’s liability for reinsurance of the Reinsured Liabilities
shall begin as of the Effective Date.

4.02

Termination. All of the Reinsurer’s liability with respect to a Policy shall
terminate as of the earlier of (i) the date on which the Ceding Company’s
liability for such Policy terminates, (ii) the date on which such Policy is
recaptured under Article VII, or (iii) the date this Agreement is terminated
under Article VII; provided that, in all cases, all amounts due the Ceding
Company under this Agreement with respect to such Policy or Policies have been
paid or deducted from the Custody Account.

4.03

Statutory Reserve Credit.  The parties intend that the Ceding Company shall
receive statutory reserve credit for the reinsurance ceded hereunder, and the
Reinsurer shall take all action necessary to effect that intent.  The statutory
reserve credit taken with respect to the Policies is intended to be equal to the
Quota Share of the Reserves.

4.04

Exclusions. Notwithstanding any provision of this Agreement to the contrary, the
Reinsurer shall not be liable for any liabilities or obligations of the Company
that are not Reinsured Liabilities, including:

a.

any liabilities or losses on the Policies relating to benefits other than those
conferred by and payable under the Policies;

b.

any liabilities resulting from any coverage added after the Effective Date to a
Policy that is not required by the express terms of the Policy in effect on the
Effective Date, unless such additional coverage has been approved in writing in
advance by the Reinsurer;

c.

any Extra-Contractual Obligations;

d.

any loss or liabilities relating to or arising from actions taken by the Company
without consent of the Reinsurer as required by this Agreement; and

e.

any loss or liabilities relating to or arising from claims made, or lawsuits
brought, by agents, representatives, or employees of the Company.

Page 9

EXECUTION COPY

(collectively, (a) – (e) constitute the “Excluded Liabilities”).  

The Ceding Company agrees to defend, indemnify, and hold harmless the Reinsurer
from and against any and all Excluded Liabilities whatsoever incurred by the
Reinsurer arising out of, relating to or in connection with this Agreement or
the Policies, including the Assumed Policies.  The Reinsurer shall notify the
Ceding Company in writing within ten (10) Business Days after receipt of notice
of any claim or suit against the Reinsurer for which the Reinsurer seeks
indemnification hereunder.  Failure to deliver such notice in a timely manner as
specified in the preceding sentence shall not be deemed a waiver of the
Reinsurer’s right to indemnification hereunder in connection with such claim,
but the amount of reimbursement to which the Reinsurer is entitled shall be
reduced to the extent the Ceding Company is materially prejudiced by such
failure to timely deliver such notice.  The Ceding Company shall be entitled to
make such investigation, settlement or defense of the claim or suit as it deems
prudent; provided, that the Ceding Company shall not settle any claim or suit
unless (i)(1) such settlement is on exclusively monetary terms, (2) the Ceding
Company obtains a complete release for the Reinsurer with respect to such claim
or suit, (3) such settlement would not be reasonably expected to result in an
adverse effect on the liabilities related to the Policies, including the Assumed
Policies, or the reputation, licenses or regulatory status of the Reinsurer and
(4) such settlement does not involve a class action claim or a claim which
alleges bad faith on the part of the Reinsurer, or (ii) the Reinsurer shall have
consented to the terms of such settlement, which consent shall not be
unreasonably withheld, conditioned, or delayed.

4.05

Misstatement.    In the event that the amount of liability provided by any
Policy is increased or reduced because of a misstatement of age or sex, or any
other material fact, the reinsurance hereunder shall increase or reduce
proportionately.  Otherwise, the amount of reinsurance under this Agreement
shall be maintained in force without reduction, so long as the amounts of
insurance carried by the Ceding Company on the Policyholders remain in force
without reduction.

Page 10

EXECUTION COPY

ARTICLE V

CONSIDERATIONS

5.01

Transfer of Assets. On or as soon as practicable after the Closing Date, the
Ceding Company will transfer to the Reinsurer cash, cash equivalents and the
assets set forth in Schedule D (including all cash flows from such assets and
simple interest on cash at a rate of 0.07% per year from the Effective Date
until the transfer date), equal to the Ceding Company’s good faith estimate of
the sum of (i) the Quota Share of the Reserves, less (ii) the Initial Ceding
Commission, less (iii) Policy loans, less (iv) due premiums, less (v) deferred
premiums, plus (vi) advance premiums, plus (vii) an amount equal to the premium
taxes, if any, due on the foregoing; in each case as of the Effective Date, free
and clear of all liens, charges, claims or other interests.  Within twenty (20)
days after such transfer, the Ceding Company shall provide the Reinsurer with a
final figure for this calculation.  Within five (5) Business Days after receipt
of such final figure, the Reinsurer shall notify the Ceding Company of any
disagreement with the figure.  Within two (2) Business Days of agreeing on or
otherwise finalizing the figure, the Party owing the difference between the
final figure and the estimated figure shall pay that difference to the other
Party, along with simple interest at a rate of 0.07% per year from the date of
the original transfer of assets until payment of the difference.  Any
transferred asset shall be assigned or endorsed in blank by the Ceding Company
to the Reinsurer in order to transfer absolutely and unequivocally all right,
title and interest in such assets.

5.02

Premiums.  On each Settlement Date, the Ceding Company shall pay to the
Reinsurer the Quota Share of all premiums collected from the Policyholders on
the Policies for the calendar month preceding such Settlement Date, net of any
premiums paid or payable by the Ceding Company under and in accordance with
Third Party Reinsurance Agreements. Premiums to be received by the Reinsurer for
the Policies shall become the sole property of the Reinsurer as of the issuance
of the Policy.

5.03

Commissions.  On each Settlement Date, (i) the Reinsurer shall pay to the Ceding
Company its Quota Share of the commissions paid on the Policies for the calendar
month preceding such Settlement Date, but at rates no greater than those
described in Schedule

Page 11

EXECUTION COPY

C, and (ii) the Ceding Company shall pay to the Reinsurer the Quota Share of the
commission charge backs or other recoveries and collections received on Policies
for the calendar month corresponding to such Settlement Date, but at the rates
no greater than those described in Schedule C.

5.04

Reinsured Liabilities. On each Settlement Date, the Reinsurer shall pay to the
Ceding Company, for the calendar month preceding such Settlement Date, an amount
equal to the Quota Share of the Reinsured Liabilities paid in accordance with
Article X.

5.06

Expense and Administration Allowance. On each Settlement Date, the Reinsurer
shall pay to the Ceding Company, for the calendar month preceding such
Settlement Date, a Maintenance Expense Allowance for the expense and
administration fees in the amounts determined in accordance with Schedule C.

5.07

Premium Tax and Guaranty Fund Assessment Reimbursement.  The Reinsurer shall
reimburse the Ceding Company for the Reinsurer’s Quota Share of premium taxes
assessed against the Ceding Company for premiums received after the Effective
Date on the Policies, by any state, county, parish, or municipal authority.  The
Reinsurer shall not reimburse the Ceding Company for the Reinsurer’s Quota Share
of any Guaranty Fund assessments made after the Effective Date on the Policies.

5.08

Custody Account. The Reinsurer shall establish as soon as practicable following
the execution hereof a pledged custody account (the “Custody Account”) and
related collateral arrangements for the benefit of the Ceding Company under the
Security and Collateral Agency Agreement and deposit into the Custody Account
the transfer of assets, and thereafter, premiums received on each Settlement
Date.  The deposit and ongoing maintenance of such assets shall be governed by
the additional requirements as set out in the Security and Collateral Agency
Agreement.

5.09

Novation of Reinsurance.  Reinsurer shall use commercially reasonable efforts to
substitute itself as the reinsurer as of the Effective Date, and thus obtain a
novation of, the Coinsurance Agreement dated November 1, 2008 between Ceding
Company as reinsurer and Lafayette Life Insurance Company and the Coinsurance
Agreement dated

Page 12

EXECUTION COPY

December 31, 2003 between Ceding Company as reinsurer and Kanawha Insurance
Company.  The Ceding Company shall, upon request, use commercially reasonable
efforts to assist the Reinsurer in such efforts, to cause such agreements to be
assumed by the Reinsurer so that the reinsurance obligations of the Ceding
Company from and after the Effective Date shall be the direct obligations of the
Reinsurer, and no longer an obligation of Ceding Company, in accordance with all
applicable laws and regulations.  The costs of novation shall be borne solely by
the Reinsurer; provided that the Ceding Company shall bear its own costs, if
any.

ARTICLE VI

ACCOUNTING AND SETTLEMENT

6.01

Reports.  On each Settlement Reporting Date, the Ceding Company will submit to
the Reinsurer a report of activity and settlements for the calendar month
preceding the Settlement Reporting Date in a form substantially similar to
Schedule B which shall contain the amount of premiums, commissions, expense and
administration allowances, Reinsured Liabilities, Reserves (including the
reserves of Third Party Reinsurance Agreements), number of Policies and account
values in force for the calendar month relating to the Settlement Reporting
Date. The Ceding Company also agrees to provide monthly and quarterly reports of
the Policy detail information containing the data and in the format requested by
Reinsurer and reasonably available to Ceding Company.

6.02

Cash Settlements.  On each Settlement Date:

a.  The Ceding Company shall pay to the Reinsurer:

i.

the net amount of premiums as defined in Section 5.02;

b. Simultaneously, the Reinsurer shall pay to the Ceding Company:

i.

the net paid Reinsured Liabilities as defined in Section 5.04; and

ii.

the net Commissions as defined in Section 5.03; and

iii.

the expense and administration allowance as defined in Section 5.06.

 

6.03

Amounts Due.  Except as otherwise specifically provided in this Agreement, all
amounts due to be paid to either the Ceding Company or the Reinsurer under this

Page 13

EXECUTION COPY

Agreement on each Settlement Date shall be determined on a net basis and shall
be due and payable on the Settlement Date.  If the amounts, as defined in
Section 6.02 above, cannot be determined at such dates as defined herein, on an
exact basis, such payments will be paid in accordance with a mutually agreeable
formula which will approximate the actual payments.

6.04

Delayed Payments.  For purposes of Section 6.03 above, if there is a delayed
settlement of a payment due, there will be an interest penalty assessed, in an
amount calculated as:  the amount of the payment which is delinquent, multiplied
by ten percent (10%), multiplied by the number of days such amount has been
delinquent, regardless of holidays or weekends, and divided by the whole number
365.  For purposes of this Section 6.04, a payment shall be considered delayed
fifteen (15) Business Days from the date such payment is due.  For purposes of
this Agreement the number of days a payment is delinquent shall commence on the
day following the date such payment is deemed overdue, as defined above, and
shall end on the date such payment is wired.

6.05

Offset of Payments.  All monies due either the Ceding Company or the Reinsurer
under this Agreement shall be offset against each other, dollar for dollar,
regardless of any insolvency of either party.

ARTICLE VII

TERMINATION AND RECAPTURE

7.01

Termination.  This Agreement may be terminated and recaptured only by mutual
written consent of the parties or as provided in this Article VII.

7.02

Termination by Term.  This Agreement shall automatically and immediately
terminate at the date the liability of the Ceding Company on the last Policy
covered hereunder terminates.  Any and all amounts that may be owed one party by
the other and remain unpaid as of such date shall immediately become due and
payable as of the date such last Policy expires.  No additional accounting or
settlements, other than the customary and usual monthly settlement as defined in
Article VI, will be made, with the last day of such month defined as the date of
termination as contemplated by this Section

Page 14

EXECUTION COPY

7.02.  No interpretation should be given to this Section or to this Article in
general that would have the result that the Reinsurer could recover any losses
of any nature upon the termination of the Agreement under this Section 7.02.

7.03

Recapture by the Ceding Company. The Ceding Company shall have the right to
recapture the Policies in full, at such time and in such manner as set forth
below for any of the following numerated defaults by the Reinsurer, should the
Reinsurer:

a.

cease doing business; or

b.

be Insolvent, as defined in Section 8.01; or

c.

be proven culpable for fraud or embezzlement; or

d.

be found to have failed to comply with any applicable federal, state or
municipal statute, law, rule, or regulation governing the insurance or
reinsurance of the Policies; or

e.

be found in default of this Agreement; or

f.

. have the reserve credit taken by the Ceding Company with respect to this
Agreement disallowed by any state in which the Ceding Company is licensed.

The Ceding Company shall give written notice to the Reinsurer that the Reinsurer
is in default of one or more of the conditions described above. Except for
Section 7.03(f), the Reinsurer shall have fifteen (15) days in which to remedy
such default(s).  If at the end of such fifteen (15) days, the Reinsurer shall
have failed to secure such remedy as may be required in the sole opinion of the
Ceding Company, the Policies shall be immediately eligible for recapture as of
the sixteenth (16th) day from the date such notification of default(s) was first
sent.

For a default of Sections 7.03(f), the Reinsurer shall have fifteen (15) days in
which to provide the Ceding Company with a plan to remedy such default and an
additional forty-five (45) days in which to remedy such default.  If at the end
of such sixty (60) days, the Reinsurer shall have failed, in the case of Section
7.03(f) to secure such remedy as may be required in the sole opinion of the
Ceding Company to take all steps necessary for the Ceding Company to obtain full
credit on its statutory financial statements for reinsurance,

Page 15

EXECUTION COPY

the Policies shall be immediately eligible for recapture as of the sixty-first
(61st) day from the date such notification of default was first sent, or in the
case of the Reinsurer, should have been sent.

7.04

Method of Termination or Recapture. In the event the Ceding Company elects to
recapture the Policies, as provided above, then such recapture shall apply to
all Policies which have not become Assumed Policies.  Should this Agreement be
terminated or recaptured for any of the reasons contained in Section 7.03, the
Reinsurer agrees to pay to the Ceding Company an amount equal to the Quota Share
of the Reserves as of the effective date of termination or recapture.

ARTICLE VIII

INSOLVENCY

8.01   Insolvency of a Party to this Agreement.    A party to this Agreement
will be deemed insolvent when it:

a.

applies for or consents to the appointment of a receiver, rehabilitator,
conservator, liquidator or statutory successor of its properties or assets; or

b.

is adjudicated as bankrupt or insolvent; or

c.

files or consents to the filing of a petition in bankruptcy, dissolution,
liquidation or similar law or statute; seeks reorganization to avoid insolvency;
or makes formal application for any bankruptcy, dissolution, liquidation or
similar law or statute; or

d.

becomes the subject of an order to rehabilitate or an order to liquidate as
defined by the insurance code of the jurisdiction of the party’s domicile.

8.02   Insolvency of the Ceding Company.   In the event of the insolvency of the
Ceding Company, all reinsurance payments due under this Agreement will be
payable directly to the liquidator, rehabilitator, receiver, or statutory
successor of the Ceding Company, without diminution because of the insolvency,
for those claims allowed against the Ceding Company by any court of competent
jurisdiction or by the

Page 16

EXECUTION COPY

liquidator, rehabilitator, receiver or statutory successor having authority to
allow such claims.

In the event of insolvency of the Ceding Company, the liquidator, rehabilitator,
receiver, or statutory successor will give written notice to the Reinsurer of
all pending claims against the Ceding Company on any of the Policies within a
reasonable time after such claim is filed in the insolvency proceeding. While a
claim is pending, the Reinsurer may investigate and interpose, at its own
expense, in the proceeding where the claim is adjudicated, any defense or
defenses that it may deem available to the Ceding Company or its liquidator,
rehabilitator, receiver, or statutory successor.

The expense incurred by the Reinsurer will be chargeable, subject to court
approval, against the Ceding Company as part of the expense of liquidation to
the extent of a proportionate share of the benefit that may accrue to the Ceding
Company solely as a result of the defense undertaken by the Reinsurer. Where two
or more reinsurers are participating in the same claim and a
majority-in-interest elect to interpose a defense or defenses to any such claim,
the expense will be apportioned in accordance with the terms of this Agreement
as though such expense had been incurred by the Ceding Company.

The Reinsurer will be liable only for the amounts reinsured and will not be or
become liable for any amounts or reserves to be held by the Ceding Company on
the Policies which may be in excess of the amounts reinsured.

ARTICLE IX

DAC TAX

9.01

Policy Acquisition Expense Election.  

a.

The Ceding Company and the Reinsurer agree to elect, pursuant to U.S. Treasury
Regulations Section 1.848-2(g)(8), to determine specified policy acquisition
expenses with respect to this Agreement without regard to the general deductions
limitation of Section 848(c)(1) of the Internal Revenue Code of 1986, as amended
(the “Code”), (the “DAC Tax Election”).  

Page 17

EXECUTION COPY

b.

This DAC Tax Election will be effective for the first taxable year in which this
Agreement is effective and for all years for which this Agreement remains in
effect, and each party agrees that it will take no action to revoke such DAC Tax
Election.

c.

The party with the net positive consideration for this Agreement for each
taxable year will capitalize specified policy acquisition expenses with respect
to this Agreement without regard to the general deductions limitation of Section
848(c)(1) of the Code.

d.

The parties agree to exchange information pertaining to the amount of net
consideration under this Agreement each year to ensure consistency.  If
requested, the Ceding Company will provide supporting information reasonably
requested by the Reinsurer. (The term “net consideration” means “net
consideration” as defined in Regulation Section 1.848-2(f)).

e.

The Ceding Company and the Reinsurer will each attach a schedule to their
respective federal income tax returns filed for the first taxable year for which
this DAC Tax Election is effective, and each year thereafter.  Such schedules
will identify the Agreement as a reinsurance agreement for which the DAC Tax
Election under Regulation Section 1.848-2(g)(8) has been made.

f.

The Ceding Company and the Reinsurer represent and warrant that each is
respectively subject to U.S. taxation under the provision of subchapter L of
Chapter 1 or the provisions of subpart F of subchapter N of Chapter 1 of the
Code.

ARTICLE X

POLICY ADMINISTRATION

10.01   Administration.  The Ceding Company shall provide all administration and
accounting for and in accordance with the express terms of the Policies.
 Subject to Section 10.04 and the other terms of this Agreement, the Ceding
Company has full authority to administer the Policies, including determining
liability on any claim reinsured hereunder and may settle losses as it deems
appropriate.  In its administration and accounting, the Ceding Company shall (1)
act in good faith and in a professional and

Page 18

EXECUTION COPY

timely manner, and without regard to the fact that such Policies are subject to
the coinsurance hereunder, (2) act with the skill and diligence commonly
expected from qualified personnel performing such duties for U.S. life insurance
companies and consistent with the Company’s internal company guidelines, (3) be
in conformance with Applicable Law in all material respects, and (4) act in a
manner with no less skill, diligence and expertise as the Ceding Company applies
to servicing its other business.  

10.02

Notice.  Upon request of the Reinsurer, the Ceding Company will notify the
Reinsurer monthly after receipt of any information on a claim or surrender on a
Policy to the extent it is reinsured hereunder.  The reinsurance claim form and
copies of notifications, claim papers, and proofs will be furnished the
Reinsurer as soon as possible.

10.03    Liability and Payment.  Reinsured Liabilities shall be paid by the
Ceding Company in accordance with the express terms of the Policy and this
Agreement to any beneficiary or Policyholder, without regard to any permitted
Third Party Reinsurance Agreements, whether collectible or uncollectible.
 Should the Ceding Company be in conservatorship or receivership at the time
such Policyholder claim is made by any beneficiary or Policyholder under the
express terms of his/her Policy, the Reinsurer shall pay the Quota Share of the
gross claim against the Ceding Company's estate or the Reinsurer may interpose a
defense on behalf of the Ceding Company as provided in Article VIII.

10.04   Contested Claims.  The Ceding Company will provide written notice to the
Reinsurer of its intention to contest, compromise, or litigate a claim involving
a Reinsured Liability. Absent written consent of the Reinsurer, and subject to
the terms of Section 4.04, the Ceding Company shall not settle any claim
involving an Excluded Liability that would reasonably be expected to result in
an adverse effect on the liabilities related to the Policies, including the
Assumed Policies, or the reputation, licenses or regulatory status of the
Reinsurer. In any event, the Reinsurer shall have the right, upon written
notice, to investigate, contest, defend or settle any claim not involving
Excluded Liabilities and in such case, will pay its share of the additional
expenses of the contest in

Page 19

EXECUTION COPY

addition to its share of the Reinsured Liability associated with such claim, or
it may choose not to participate.  If the Reinsurer chooses not to participate,
it will discharge its Reinsured Liability by payment to the Ceding Company of
the full Quota Share of such liability.

10.05  Determination of Interest Credited Rate.  The Reinsurer acknowledges that
the Ceding Company has the sole right to establish credited rates and insurance
charges for Policies that are not Assumed Policies so long as this Agreement is
in place.  The Ceding Company acknowledges that, upon assumption, if any, of a
Policy, the Reinsurer shall have the sole right to establish credited rates and
insurance charges for such Assumed Policy.  Notwithstanding the previous two
sentences, in the event the Ceding Company intends to change its credited rates
or insurance charges on any of the Policies that are not Assumed Policies during
the term of this Agreement, it shall not do so without the agreement of the
Reinsurer, which shall not be unreasonably withheld, conditioned or delayed.

ARTICLE XI

ARBITRATION

11.01   Agreement.  The parties shall cooperate with each other in a
commercially reasonable manner in order that the parties' performance under the
Transaction Documents may be effectively, efficiently and promptly discharged
and to resolve all disputes in good faith.  However, in the event the parties
cannot mutually resolve a dispute or claim, such disputes or claims will be
decided by arbitration, regardless of the insolvency of either party, unless the
conservator, receiver, liquidator, or statutory successor is specifically
exempted from an arbitration proceeding by applicable state law.  Either party
may initiate arbitration by providing written notification to the other party.
 Such written notice shall contain a brief statement of the issue(s), the
failure on behalf of the parties to reach amicable agreement and the date of
demand for arbitration.  The arbitrators will regard the Transaction Documents
from the standpoint of practical business and equitable principles rather than
that of strict law.  The arbitrators shall be

Page 20

EXECUTION COPY

solely responsible for determining what shall be considered and what procedure
they deem appropriate and necessary in the gathering of such facts or data to
decide such dispute.  Both parties agree that the decision of the arbitrators is
final and binding and that no appeal shall be made from that decision.  Should
either party fail to comply with the decision of the arbitrators, the other
party shall have the right to seek and receive the assistance of an appropriate
court to enforce the decision of the arbitrators.  The costs of the arbitration
are to be borne equally by both parties unless the arbitrators decide otherwise.

11.02

Method.  Three arbitrators will decide any differences.  They must be, or have
been, officers of life insurance companies or fraternal societies other than the
two parties to this Agreement or any company owned by, or affiliated with,
either party.

a.

Method of Selection of Initial Two Arbitrators. One of the arbitrators is to be
appointed by the Ceding Company, another by the Reinsurer, and the two
arbitrators so appointed shall select a third before arbitration begins.  The
arbitrators picked by the parties shall be contacted by the party that so chose
the arbitrator.  They may share the notice of arbitration letter, this Article
of this Agreement and briefly explain the nature of the dispute such as the
types of policies involved, the reinsurance issues in dispute, so that the
candidate may make an informed decision as to his/her technical qualifications
to serve, but no more than that.  They should in no way be “canvassing” the
candidate for his/her sympathies with their side of the dispute, nor take any
action that would compromise the candidate’s impartiality.  Should one party
fail to comply with the notice to arbitrate and fail to select an arbitrator
within the time allotted below, the other party shall have the right to appoint
such arbitrator on their behalf.  The appointments shall be made in the
following manner:  the Ceding Company and the Reinsurer shall each present an
initial list of five prospective arbitrators to the other party within 25
calendar days of the postmark on the mailing of the notification initiating the
arbitration.  The Ceding Company and the Reinsurer shall select one arbitrator
each from the list supplied by the other party.  Should the selected arbitrator
decline to

Page 21

EXECUTION COPY

serve, another name shall be selected from the respective list. The entire
process of selection of the first two arbitrators shall be accomplished within
45 calendar days of the postmark on the mailing of the notification initiating
the arbitration.  The party who initiated the list will submit as many
additional names as necessary so that at all times there will be a pool of five
names from which the other party may make its selection.

b.

Selection of final Panel Member. The two arbitrators, once selected, shall then
select the third arbitrator from the remaining eight names on the two lists
within 20 calendar days of the second arbitrator’s date of appointment.  Should
the two arbitrators be unable to agree on a choice for the third arbitrator the
remaining eight names shall be placed in a pool and the final arbitrator shall
be drawn at random from such pool by the two arbitrators within 5 additional
calendar days from the expiry of the date such third arbitrator should have been
appointed.  If the prospective arbitrator so chosen shall decline to serve as
the third arbitrator, another prospective arbitrator shall be randomly selected
until the original pool is exhausted.  The parties shall continue to replace the
pool with an additional eight names until an arbitrator is found.

c.

Initial Submission to Panel. Once the panel is selected the party initiating the
arbitration will submit in writing its understanding of the dispute and the
outstanding issues surrounding such dispute, their attempt(s) to rectify such
dispute, and their proposed solution to settle the dispute within 20 calendar
days after the final arbitration panel member has been selected.  The other
party shall be provided with a copy of this initial statement and shall respond
in writing with their understanding of the dispute within 30 calendar days after
the final arbitration panel member has been selected.

From this point forward all other matters procedural or factual shall be solely
at the discretion or direction of the arbitration panel.

Page 22

EXECUTION COPY

ARTICLE XII

REPRESENTATIONS AND WARRANTIES OF REINSURER

12.01 Representations and Warranties of Reinsurer.  As a material inducement to
Ceding Company to enter into the Transaction Documents, Reinsurer hereby
represents and warrants to Ceding Company that the following statements are true
and correct as of the Effective Date and will be true and correct throughout the
term of this Transaction Documents.

12.02  Organization and Standing of Reinsurer.  Reinsurer is an insurance
company duly organized and validly existing under the laws of Delaware.

12.03  Authorization.  Reinsurer has all requisite power and authority to enter
into the Transaction Documents, and to perform the obligations thereunder.  The
execution and delivery by Reinsurer of the Transaction Documents and the
performance by Reinsurer of its obligations thereunder have been duly authorized
and are valid and binding obligations of Reinsurer, enforceable against it in
accordance with its terms.

12.04

No Conflict or Violation.  The execution, delivery and performance of the
Transaction Documents by Reinsurer will not (i) violate any provision of the
Articles of Incorporation, By-laws or other charter or organizational document
of Reinsurer; (ii) violate, conflict with or result in the breach of any of the
terms of, result in any modification of, give any counterparty the right to
terminate, or constitute a default under, any contract or other agreement to
which Reinsurer is a party which would materially affect the Transaction
Documents, including the ability of Reinsurer to pay all amounts due hereunder;
or (iii) violate any Applicable Law applicable to Reinsurer.

12.05  

Litigation Against Reinsurer.  There are no actions, suits, or proceedings
pending or, to the knowledge of Reinsurer, threatened against Reinsurer at law
or in equity, in, before, or by any Person, that individually or in the
aggregate have or may reasonably be expected to have a material adverse effect
on the validity or enforceability of the Transaction Documents or the
transactions contemplated hereby.

Page 23

EXECUTION COPY

ARTICLE XIII

REPRESENTATIONS AND WARRANTIES OF CEDING COMPANY

13.01 Representations and Warranties of Ceding Company.  As a material
inducement to Reinsurer to enter into the Transaction Documents, Ceding Company
hereby represents and warrants to Reinsurer that the following statements are
true and correct as of the Effective Date and will be true and correct
throughout the term of the Transaction Documents.  

13.02

Organization and Standing of Ceding Company.  Ceding Company is an insurance
company duly organized and validly existing under the laws of the State of
Wisconsin.

13.03

Applicable Law. To the best of its knowledge, Ceding Company is in compliance
with all Applicable Law with respect to the Policies.

13.04

Authorization.  Ceding Company has all requisite power and authority to enter
into the Transaction Documents, and to perform its obligations thereunder.  The
execution and delivery by Ceding Company of the Transaction Documents and the
performance by Ceding Company of its obligations thereunder have been duly
authorized and are valid and binding obligations of Ceding Company, enforceable
against it in accordance with its terms.  Without limiting the foregoing, Ceding
Company will seek all required regulatory approvals of the applicable Insurance
Departments and other Governmental Entities to enter into the coinsurance
agreement, the assumption agreement and services hereunder and to perform the
asset transfers and other obligations hereunder.

13.05  

No Conflict or Violation.  The execution, delivery and performance of the
Transaction Documents will not (i) violate any provision of the Articles of
Incorporation, By-laws or other charter or organizational document of Ceding
Company; (ii) violate, conflict with or result in the breach of any of the terms
of, result in any modification of, give any counterparty the right to terminate,
or constitute a default under any contract or other agreement to which Ceding
Company is a party which would materially affect the

Page 24

EXECUTION COPY

Transaction Documents, including the ability of Ceding Company to cede the
liabilities described hereunder; or (iii) violate any Applicable Law applicable
to Ceding Company.

13.06  

Litigation Against Ceding Company.  There are no actions, suits or proceedings
pending or, to the knowledge of Ceding Company, threatened against Ceding
Company at law or in equity, in, before, or by any Person that individually or
in the aggregate have or may reasonably be expected to have a material adverse
effect on the validity or enforceability of the Transaction Documents or the
transactions contemplated hereby. The Ceding Company has made available in
writing to the Reinsurer true, correct and complete copies of all binders,
certificates, endorsements, riders, and agreements in connection with the
Policies.  There is no past or present class action or purported class action,
or any past or present claim, litigation, arbitration, settlement, judgment or
order, related to the Policies.

ARTICLE XIV

CONFIDENTIALITY

14.01  

Confidentiality.  The parties will comply with all applicable state and federal
privacy laws and requirements.  In addition, the parties will keep the business,
policy and other records of the other Party, as well as all the other party’s
trade secrets and other confidential information, provided to it in connection
with the Transaction Documents confidential and shall not disclose or reveal
such information to anyone (other than its employees, representatives and agents
and those of its affiliates), and the parties will not use for any purpose
whatsoever, other than performing their responsibilities under this Agreement,
any such information, unless such parties are legally required to disclose or
reveal such information, provided that in that event such information shall be
disclosed only to the extent required to satisfy such legal requirement and only
after giving five (5) Business Days prior notice (to the extent practicable) to
the other Party of such required disclosure.

Page 25

EXECUTION COPY

ARTICLE XVII

GENERAL PROVISIONS

15.01

Misunderstandings and Oversights.  Except as otherwise provided with respect to
Excluded Liabilities, if any failure to pay amounts due or to perform any other
act required by this Agreement is unintentional and caused by misunderstanding
or oversight, the Ceding Company and the Reinsurer will adjust the situation to
what it would have been had the misunderstanding or oversight not occurred.  A
misunderstanding and oversight may only be deemed to have occurred if both the
Ceding Company and Reinsurer agree to its nature and effect herein, or if such a
determination is made under arbitration, as contained herein.

15.02

Reinstatements.  If a Policy reinsured hereunder that was reduced, terminated,
or lapsed, is reinstated, the reinsurance for such Policy under this Agreement
will be reinstated automatically to the amount that would have been in force if
the Policy had not been reduced, terminated, or lapsed. Reinsurer also agrees to
assume the Ceding Company’s obligations, if any, to reinstate lapsed policies
that were entitled to reinstatement on the Effective Date and that are part of
the plans ceded hereunder, subject to the underwriting criteria imposed by the
lapsed policies.  Upon reinstatement, the lapsed policies shall be included in
the Policies reinsured and under the terms and conditions of this Agreement. The
Reinsurer will be entitled to the Quota Share of premiums and interest that the
Ceding Company has received for any reinstatement.

15.03

Facility of Reinsurance.  After the Effective Date, the Ceding Company shall not
cede any liabilities to reinsurers with respect to the Policies without the
express written approval of the Reinsurer.  The Reinsurer will not unreasonably
withhold its approval as contemplated within this Section.  The Reinsurer agrees
that no retrocessions of the Policies shall be made to any third party without
the express written consent of the Ceding Company, provided, however, that the
Reinsurer may, at any time, with prior written notice of the Ceding Company and
subject to applicable notice and other regulatory requirements, retrocede on a
coinsurance basis, any or all of the Policies to a Controlled Affiliate.  

Page 26

EXECUTION COPY

15.04

Policy Changes. Should the Ceding Company make any material changes after the
Effective Date of this Agreement in the provisions and conditions of the Policy
permitted by this Agreement, the Ceding Company shall, within a reasonable time,
inform the Reinsurer of such change.  There shall then be a corresponding change
in the related reinsurance and appropriate cash adjustments shall be made
consistent with the changed rules of the Ceding Company.

15.05

Audit.  The Ceding Company or the Reinsurer, their respective employees or
authorized representatives may audit, inspect and examine, during regular
business hours, at the home office or principal place of business of the Ceding
Company or the Reinsurer, provided that reasonable advance notice has been given
to the other party, any and all books, records, statements, correspondence,
reports, trust accounts and their related documents or other documents that
relate to the Policies.  The audited party agrees to provide a reasonable work
space for such audit, inspection or examination and to cooperate fully and to
faithfully disclose the existence of and produce any and all necessary and
reasonable materials requested by such auditors, investigators, or examiners.
 The expense of the respective party's employee(s) or authorized
representative(s) engaged in such activities shall be borne solely by such
party.

15.06

Integration.  This Agreement supersedes all prior discussions and agreements
between the parties with respect to the subject matter of this Agreement, and
this Agreement, including the Schedules and Exhibits attached hereto, contains
the sole and entire agreement between the parties with respect to the subject
matter hereof and there are no understandings between the parties other than as
expressed in this Agreement.

15.07

Law and Venue.  This Agreement is subject to and is to be interpreted in
accordance with the laws of the State of Wisconsin except that it is agreed that
the provisions of Article XI shall be governed by the CPR Rules for
Non-Administered  Arbitration. Venue for any action, suit or other proceeding
shall be exclusively in Cook County, Chicago Illinois.  The parties agree to
waive any other venue.

Page 27

EXECUTION COPY

15.08

Nonwaiver.  No forbearance on the part of either party to insist upon compliance
by the other party with the terms of this Agreement shall be construed as, or
constitute a waiver of, any of the terms of this Agreement.

15.09

Counterparts.  This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.  Such counterparts may be executed by
electronic or facsimile transmission.  

15.10

Amendments.  Any change or modification to this Agreement will be null and void
unless made by amendment to this Agreement and signed by both Parties. This
Agreement shall be amended only by mutual consent and written agreement of the
parties.

15.11

Schedules and Section Headings.  Schedules and Exhibits attached hereto are
incorporated by reference and made a part of this Agreement.  Section headings
are provided for reference purposes only and are not made a part of this
Agreement.

15.12

Financial Reports.  The Ceding Company and the Reinsurer each agree to furnish
the other with their respective NAIC Convention Blank Statements, as required by
their respective state laws, within 15 days after such reports are due to be
filed with such respective states.

15.13

Survival.  The representations, warranties, covenants and agreements
respectively required to be made by the Ceding Company and the Reinsurer in this
Agreement, including without limitation, the provisions of Section 3.02
(Licensing and Compliance Requirements), Section 4.04 (Exclusions), Article IX
(DAC Tax), Article XI (Arbitration), Article XII (Representations and Warranties
of Reinsurer), Article XIII (Representations and Warranties of Ceding Company),
Article XIV (Confidentiality), and Section 15.07 (Law and Venue) shall survive
the termination or expiration of this Agreement.

Page 28

EXECUTION COPY

15.14

Service of Suit.  Service of process in any suit may be made upon any then duly
elected or appointed officer at the address specified in Schedule E (agent for
service of process).  

15.15

Notices.  All notices and other communications under this Agreement must be in
writing and will be deemed to have been duly given if delivered personally or by
overnight delivery by a nationally recognized courier service or mailed, by
certified mail, return receipt requested, first class postage, prepaid, to the
addresses and to the attention of the parties described in Schedule E attached
hereto.

15.16   Severability.  If any provision of this Agreement is determined to be
invalid or unenforceable, such determination will not impair or affect the
validity or the enforceability of the remaining provisions of this Agreement.

15.17

Broker Fees.  Each Party hereby represents and warrants that it has not taken
any action that would impose on any other Party liability for payment of any
broker, finder, or similar fee in connection with the origin, negotiation,
execution or performance of this Agreement.

15.18

No Third Party Beneficiaries.  Nothing contained in this Agreement, express or
implied, is intended to confer any rights or remedies on any Persons other than
the parties.  In addition, nothing in this Agreement is intended to relieve or
discharge the obligation or liability of any third party to any Party to this
Agreement.

Page 29

EXECUTION COPY

ARTICLE XVI

EXECUTION AND CLOSING DATE

IN WITNESS WHEREOF, the parties hereto have caused this Indemnity Reinsurance
Agreement to be executed with a Closing Date of: 12:00 AM EDT on [●].

Guggenheim Life and Annuity Company (Reinsurer)

By:

 

Title:

 

Date:

 

Madison National Life Insurance Company, Inc. (Ceding Company)

By:

 

Title:

 

Date:

 

Page 30

EXECUTION COPY

SCHEDULE A

POLICIES

The Policies are (1) the policies listed in the electronic file of policy level
detail as of April 30, 2013 provided by the Ceding Company to the Reinsurer on
June 4, 2013, and (2) contracts annuitized under the policies described in
clause (1) from and after  the Effective Date.

Within twenty (20) days after the transfer of assets under Section 5.01, the
Ceding Company shall provide the Reinsurer with a final list and/or electronic
file of Policies as of the Effective Date, with annuity riders to life insurance
policies where the base life insurance is not being ceded to Reinsurer
separately identified as such, as a replacement for the file described in clause
(1) of this Schedule.  Within five (5) Business Days after receipt of such list
and/or electronic file, the Reinsurer shall notify the Ceding Company of any
disagreement with the final list and/or electronic file.  Absent such notice,
the list and/or electronic file shall be considered final.

EXECUTION COPY

SCHEDULE B

MONTHLY CASH SETTLEMENT REPORT

The information on the following report will be split among the following lines
of business:

·

Traditional Life

·

Universal Life

·

Deferred Annuity

·

Payout Annuity/Supplementary Contracts

·

Lafayette Life Administered Business

·

Kanawha Administered Business

EXECUTION COPY

Policy Receipts

Premiums Received

First Year

Renewal

Single Premium

Total Premiums Received

Supplementary Contract Considerations with Life Contingencies

Supplementary Contract Considerations w/o Life Contingencies

Total Receipts

Policy Disbursements

Death Benefits Paid

Interest on Death Benefits

Matured Endowments

Annuity Benefits Paid

Disability Benefits Paid

Surrender Benefits Paid

Other Interest Paid

Payments on Supplementary Contracts with Life Contingencies

Payments on Supplementary Contracts w/o Life Contingencies

Dividends Paid to Policyholders

Total Disbursements

Net Cash Flow Related to Policies

Other Policy Related Items

Policy Loans

Change in Policy Loans

EXECUTION COPY

Interest on Policy Loans

Total Policy Loans

Change in Dividend Accumulations

Change in Premium Deposit Funds and Discounted Premium Deposit Funds

Change in Premium and Loan Suspense

Total Other Policy Related Items

Other Disbursements and Fees

Administration Fees

Taxes, Licenses and Fees Paid

Net Amount Paid To or Received From Third Party Reinsurers

Commissions Paid

First Year

Renewal

Single Premium

Total Commissions Paid

Total Other Disbursements and Fees

Net Amount Due To/(From) Reinsurer

EXECUTION COPY

SCHEDULE C

COMMISSIONS AND EXPENSE ALLOWANCES

1.

Commission Allowances:

Allowances will be limited to the Policy model plans listed below (with such
model plans being identified in Schedule A) and shall be equal to actual
paid/charged back commissions paid in accordance with the applicable selling
agreements, but will not exceed the limits in this Schedule C.  

Model Plan Code

Group #

Policy Year

1

2

3

4

5

6

7

8

9

10

11+

1

U101

CommExcess%

0.6

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

1

U101

CommTarg%

0.6

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

2

U102

CommExcess%

0.6

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

2

U102

CommTarg%

0.6

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

0.035

12

U112

CommExcess%

0.95

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

12

U112

CommTarg%

0.95

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

13

U113

CommExcess%

0.7

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

13

U113

CommTarg%

0.7

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

14

U114

CommExcess%

0.95

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

14

U114

CommTarg%

0.95

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

0.06

15

U115

CommExcess%

0.25

0

0

0

0

0

0

0

0

0

0

15

U115

CommTarg%

0.25

0

0

0

0

0

0

0

0

0

0

16

U116

CommExcess%

0.25

0

0

0

0

0

0

0

0

0

0

16

U116

CommTarg%

0.25

0

0

0

0

0

0

0

0

0

0

17

U117

CommExcess%

0.03

0.03

0.03

0.03

0.03

0.03

0.03

0.03

0.03

0.03

0

17

U117

CommTarg%

1

0.03

0.03

0.01

0.01

0.01

0.01

0.01

0.01

0.01

0

19

U119

CommExcess%

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

19

U119

CommTarg%

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

0.04

Within twenty (20) days after the transfer of assets under Section 5.01, the
Ceding Company shall provide the Reinsurer with a final schedule and/or
electronic file of Commission Allowances as of the Effective Date, as a
replacement for the schedule above.  Within five (5) Business Days after receipt
of such schedule and/or electronic file, the Reinsurer shall notify the Ceding
Company of any disagreement with the final schedule and/or electronic file.
 Absent such notice, the schedule and/or electronic file shall be considered
final.

EXECUTION COPY

SCHEDULE C

COMMISSIONS AND EXPENSE ALLOWANCES

2.

Monthly Maintenance Expense Allowances:

Policies Administered by Ceding Company*

Universal Life Insurance Policies

2.75

Deferred Annuities - Base

2.08

Deferred Annuities - Rider when base reinsured

0.00

Deferred Annuities - Rider when base not reinsured

0.83

Deferred Annuities – Kanawha Policies

2.00

Traditional Life - Premium Paying

2.08

Traditional Life - Paid-Up

0.67

Traditional Life  - Extended Term

0.83

Immediate Annuities

1.67

*Applied against the count of in-force policies as of the beginning of the
month.

             Policies Administered by Lafayette

Reinsurer will reimburse Ceding Company for maintenance expenses paid by Ceding
Company under the Coinsurance Agreement between Ceding Company and The Lafayette
Life Insurance Company dated December 31, 2003.

EXECUTION COPY

SCHEDULE D

TRANSFERRED CASH

USD 106,495,460

(106,494,030 plus accrued interest as defined in Section 5.01 of USD 1,430)

TRANSFERRED ASSETS

CUSIP

Ticker

Name

Description

Original Face

 Current Face

348609AA6

FTSAMH

FT SAM HOUSTON MILIT HSG

FTSAMH 5.177 03/15/20

 

         2,000,000.00

83164FH72

SBA

SBA504754

SBA504754

2,500,000

             191,806.75

83164FWL4

SBA

SBA505151

SBA505151

1,000,000

             101,322.23

83164FXH2

SBA

SBA505180

SBA505180

3,298,436

             122,440.15

78403DAB6

SBAC

SBA TOWER TRUST

SBAC 5.101 04/17/17

 

         3,040,000.00

013078AA8

UNANA

ALBERTO-CULVER COMPANY

UNANA 5.15 06/01/20

 

             350,000.00

904764AK3

UNANA

UNILEVER CAPITAL CORP

UNANA 4.8 02/15/19

 

         3,000,000.00

871829AQ0

SYY

SYSCO CORPORATION

SYY 2.6 06/12/22

 

         5,000,000.00

532261AA2

CKH

LIGHTSHIP TANKERS IV LLC

CKH 6 1/2 06/14/24

 

             388,000.00

91412NAC4

UNICHI

UNIVERSITY OF CHICAGO

UNICHI 4.86 10/01/24

 

         1,200,000.00

822582AC6

RDSALN

SHELL INTERNATIONAL FIN

RDSALN 5.2 03/22/17

 

         1,380,000.00

822582AJ1

RDSALN

SHELL INTERNATIONAL FIN

RDSALN 4.3 09/22/19

 

         2,400,000.00

36962G5B6

GE

GENERAL ELEC CAP CORP

GE 0 04/07/14

 

         1,000,000.00

XS0275895612

GE

GENERAL ELEC CAP CORP

GE 0 12/28/18

 

         1,000,000.00

030955AB4

T

AMERITECH CAP FUNDING

T 9.1 06/01/16

 

         1,877,600.00

220027AF3

SPG

RETAIL PROPERTIES INC

SPG 7.18 09/01/13

 

         1,340,000.00

48121CJM9

JPM

JP MORGAN CHASE BANK NA

JPM 0 06/13/16

 

         4,760,000.00

656836AA1

NADB

NA DEVELOPMENT BANK

NADB 4 3/8 02/11/20

 

         5,125,000.00

452308AJ8

ITW

ILLINOIS TOOL WORKS INC

ITW 6 1/4 04/01/19

 

             800,000.00

149123BP5

CAT

CATERPILLAR INC

CAT 7 12/15/13

 

         2,000,000.00

12189PAE2

BNSF

BURLINGTN NO SF 99-1 TR

BNSF 7.16 01/02/20

3,500,000

         1,762,322.20

65364UAA4

NGGLN

NIAGARA MOHAWK POWER

NGGLN 4.881 08/15/19

 

         5,000,000.00

67021CAE7

NU

NSTAR ELECTRIC CO

NU 5 5/8 11/15/17

 

         2,200,000.00

693627AJ0

DUK

DUKE ENERGY INDIANA INC

DUK 8.85 01/15/22

 

         1,000,000.00

5926462D4

METAPT

WA METRO ARPT AUTH-C

WA METRO ARPT AUTH-C

 

         1,215,000.00

25477GCU7

DISGEN

DC INCOME TAX-E-BABS

DC INCOME TAX-E-BABS

 

         1,250,000.00

183596AA3

BALEDU

BALTIMORE SCH-QSCB

BALTIMORE SCH-QSCB

 

         3,000,000.00

320265UG4

FFLGEN

FIRST FL GOVTL-REF-B

FIRST FL GOVTL-REF-B

 

         1,000,000.00

57420PGL4

MDSDEV

MD ECON DEV-TXBL

MD ECON DEV-TXBL

 

         1,705,000.00

650035RP5

NYSDEV

NYS URBAN DEV CORP

NYS URBAN DEV CORP

 

             240,000.00

011832R95

AKSHSG

AK HFC-VETS MTG-A-2

AK HFC-VETS MTG-A-2

 

         2,320,000.00

130333BW6

CASHSG

CA HSG FIN AGY-A

CA HSG FIN AGY-A

 

             935,000.00

246395WY9

DELHSG

DE HSG AUTH-SFM-A-1

DE HSG AUTH-SFM-A-1

 

         2,640,000.00

45506ADJ7

INSHSG

IN HSG DEV AUTH-B

IN HSG DEV AUTH-B

 

         1,210,000.00

647200V35

NMSHSG

NEW MEXICO MTGE FIN-B

NEW MEXICO MTGE FIN-B

 

             955,000.00

45202LAS3

ILSMFH

IL MFH-COVERED BRIDGE

IL MFH-COVERED BRIDGE

 

         1,365,000.00

46843PBD9

JACMFH

JACKSON MFH-A-FOREST

JACKSON MFH-A-FOREST

 

         1,160,000.00

613540BU6

MONMFH

MONTGOMERY MFH CANTER

MONTGOMERY MFH CANTER

 

         1,110,000.00

167685NT9

CHISFH

CHICAGO SFM-COLL-2A

CHICAGO SFM-COLL-2A

 

         1,180,000.00

34073NF21

FLSHSG

FL HFC AMT-SER 3

FL HFC AMT-SER 3

 

         1,060,000.00

34073NX70

FLSHSG

FL HFC AMT-HMOWNR-1

FL HFC AMT-HMOWNR-1

 

             910,000.00

45129TSQ1

IDSHSG

ID HSG SFM-SR-C-2

ID HSG SFM-SR-C-2

 

         1,310,000.00

49130TKY1

KYSHSG

KY HSG CORP-AMT-D

KY HSG CORP-AMT-D

 

             500,000.00

60416SAP5

MNSHSG

MN HSG FIN AGY-A-REF

MN HSG FIN AGY-A-REF

 

             560,000.00

60416SAR1

MNSHSG

MN HSG FIN AGY-A-REF

MN HSG FIN AGY-A-REF

 

             650,000.00

60535MVX4

MSSSFH

MS HOME-SFM-AMT-B2

MS HOME-SFM-AMT-B2

 

         1,495,000.00

647200XP4

NMSHSG

NM MTG-TXB-SFM-D1

NM MTG-TXB-SFM-D1

 

             490,000.00

83712DSL1

SCSHSG

SC HSG FIN-A2-TXBL

SC HSG FIN-A2-TXBL

 

         1,925,000.00

8804593H3

TNSHSG

TN HSG AMT-HMOWNR-2A

TN HSG AMT-HMOWNR-2A

 

         4,095,000.00

88271HCN7

TXSSFH

TX SFM-A-PROFESSIONAL

TX SFM-A-PROFESSIONAL

 

             972,230.00

882750KY7

TXSHSG

TX ST DPT HSG SER B

TX ST DPT HSG SER B

 

         1,630,000.00

88275FMU0

TXSSFH

TX SFM AMT-MTG-SER B

TX SFM AMT-MTG-SER B

 

             380,000.00

92812UXV5

VASHSG

VA HSG AUTH

VA HSG AUTH

 

         1,150,000.00

38376JLG7

GNR

GNR 2009-104 KA

GNR 2009-104 KA

5,000,000

         1,781,303.40

3137AG3X6

FHR

FHR 3943 GE

FHR 3943 GE

3,000,000

         2,267,534.91

31394DRA0

FNR

FNR 2005-40 YB

FNR 2005-40 YB

2,500,000

               16,306.33

31396HD71

FHR

FHR 3113 C

FHR 3113 C

1,500,000

               47,288.49

36219WYT1

GN

GN 261822

GN 261822

35,000

                     124.12

362200HQ3

GN

GN 292839

GN 292839

50,000

                       73.63

36296PY88

GN

GN 697435

GN 697435

1,265,000

             164,214.81

02147XAJ6

CWALT

CWALT 2006-32CB A9

CWALT 2006-32CB A9

4,000,000

         1,589,780.82

45660L6Q7

RAST

RAST 2006-A1 1A8

RAST 2006-A1 1A8

1,000,000

             808,055.63

02149JCA2

CWALT

CWALT 2006-45T1 1A15

CWALT 2006-45T1 1A15

5,000,000

         3,986,193.26

11070TAB4

BRCOL

BRITISH COLUMBIA PROV OF

BRCOL 2 10/23/22

 

         5,000,000.00

6832348Z4

ONT

ONTARIO (PROVINCE OF)

ONT 1 7/8 09/15/15

 

         2,000,000.00

EXECUTION COPY

SCHEDULE E

NOTICES

IF TO THE CEDING COMPANY:

Madison National Life Insurance Company, Inc.

1241 John Q. Hammons Drive

P.O. Box 5008

Madison, WI 53705

Attn:  Joel E. Myrold

With Copies To:

Madison National Life Insurance Company, Inc.

c/o The IHC Group

485 Madison Avenue, 14th Floor

New York, NY 10022

Attn: General Counsel

IF TO THE REINSURER:

Guggenheim Life and Annuity Company

401 Pennsylvania Parkway, Suite 300

Indianapolis, Indiana 46280

Attn:  Chief Operating Officer

With Copies To:

Guggenheim Life and Annuity Company

401 Pennsylvania Parkway, Suite 300

Indianapolis, Indiana 46280

Attn:  Chief Actuary/Chief Risk Officer

EXECUTION COPY

SCHEDULE F

THIRD PARTY REINSURANCE AGREEMENTS

·

Optimum Re Insurance Company – Agreement Effective 09/30/1992

·

Optimum Re Insurance Company – Agreement Effective 10/01/1997

·

Optimum Re Insurance Company – Agreement Effective 06/30/1999

·

Optimum Re Insurance Company – Agreement Effective 11/30/1999

·

Optimum Re Insurance Company – Agreement Effective 01/01/2005

·

Scottish Re Life Corporation – Agreement Effective 03/21/1984

·

Scottish Re Life Corporation – Agreement Effective 04/01/1987

·

Scottish Re Life Corporation – Agreement Effective 10/01/1997

·

Scottish Re Life Corporation – Agreement Effective 05/01/1999

·

Swiss Re Life & Health – Agreement Effective 06/01/1998

·

Swiss Re Life & Health – Agreement Effective 11/30/1999