Exhibit 10.27

 

 

 

BUSINESS SERVICES AGREEMENT

 

dated January 1, 2004

 

between

 

GNA CORPORATION

 

and

 

UNION FIDELITY LIFE INSURANCE COMPANY

 

 

 

CONFIDENTIAL TREATMENT REQUESTED

 

CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED IS OMITTED AND IS NOTED WITH “**”. AN UNREDACTED VERSION OF
THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

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TABLE OF CONTENTS

 

ARTICLE I

DEFINITIONS

 

SECTION 1.01.

Certain Defined Terms

 

SECTION 1.02.

Other Terms

 

 

 

 

ARTICLE II

SERVICES AND TERMS

 

SECTION 2.01.

Services; Scope

 

 

 

 

ARTICLE III

COSTS AND DISBURSEMENTS

 

SECTION 3.01.

Costs and Disbursements.

 

 

 

 

ARTICLE IV

STANDARD FOR SERVICE; COMPLIANCE WITH APPLICABLE LAW; LIMITED LIABILITY

 

SECTION 4.01.

Standard for Service

 

SECTION 4.02.

Compliance with Applicable Law

 

SECTION 4.03.

Limited Liability

 

 

 

 

ARTICLE V

DISPUTE RESOLUTION

 

SECTION 5.01.

General Provisions

 

SECTION 5.02.

Consideration by Senior Executives

 

SECTION 5.03.

Mediation

 

SECTION 5.04.

Arbitration

 

 

 

 

ARTICLE VI

TERMINATION

 

SECTION 6.01.

Termination of the Agreement.

 

SECTION 6.02.

Termination with Respect to Any Reinsured Business or Recaptured Business

 

SECTION 6.03.

Effect of Termination

 

SECTION 6.04.

Survival

 

SECTION 6.05.

Force Majeure

 

 

 

 

ARTICLE VII

GENERAL PROVISIONS

 

SECTION 7.01.

Subcontractors

 

SECTION 7.02.

Additional Services; Books and Records.

 

SECTION 7.03.

Taxes.

 

SECTION 7.04.

Confidential Information

 

SECTION 7.05.

Non-disclosure; Privilege; Conflicts of Interest

 

SECTION 7.06.

Headings and Schedules

 

SECTION 7.07.

Notices

 

SECTION 7.08.

Successors and Assigns

 

SECTION 7.09.

Execution in Counterpart

 

SECTION 7.10.

Currency

 

SECTION 7.11.

Amendments

 

SECTION 7.12.

Governing Law

 

SECTION 7.13.

Entire Agreement; Severability

 

SECTION 7.14.

No Waiver; Preservation of Remedies

 

 

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SECTION 7.15.

Cooperation

 

SECTION 7.16.

Third Party Beneficiary

 

SECTION 7.17.

Negotiated Agreement

 

SECTION 7.18.

Interpretation

 

SECTION 7.19.

No Right to Set-Off

 

 

 

 

SCHEDULES

 

 

 

 

 

SCHEDULE A

Services

 

SCHEDULE B

Reinsured Businesses and Recaptured Business

 

SCHEDULE C

Service Charges

 

SCHEDULE D

Business Associate Addendum

 

 

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This Business Services Agreement, dated January 1, 2004 (this “Agreement”), is
made by and between GNA CORPORATION, a Washington corporation (“GNA”) and UNION
FIDELITY LIFE INSURANCE COMPANY, an insurance company organized under the laws
of the State of Illinois (the “Company”).

 

RECITALS

 

A.            WHEREAS, GNA, General Electric Company, a New York corporation
(“General Electric”), and certain of its other affiliates entered into a Master
Agreement, dated as of May 24, 2004 (the “Master Agreement”); and

 

B.            WHEREAS, it is contemplated by the Master Agreement that after the
date hereof GNA will continue to perform, or GNA will cause its Subsidiaries and
Affiliates to continue to perform, certain administrative and support services
with respect to the Reinsured Businesses (as defined below) and that GNA will
perform, or GNA will cause its Subsidiaries and Affiliates to perform, certain
administrative and support services with respect to the Recaptured Business (as
defined below) in accordance with the terms and subject to the conditions set
forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:

 

ARTICLE I

DEFINITIONS

 

                                SECTION 1.01.      Certain Defined Terms. 
Unless otherwise defined herein, all capitalized terms used herein shall have
the same meaning as in the Master Agreement.

 

The following capitalized terms used in this Agreement shall have the meanings
set forth below:

 

“Applicable Law” means any federal, state, local or foreign law (including
common law), statute, ordinance, rule, regulation, order, writ, injunction,
judgment, permit, governmental agreement or decree applicable to a Person or any
such Person’s subsidiaries, properties, assets, or to such Person’s officers,
directors, managing directors, employees or agents in their capacity as such.

 

“CPR Arbitration Rules” shall have the meaning specified in Section 5.04(a)

 

“GEFA” means GE Financial Assurance Holdings, Inc.

 

“Governmental Authority” means any foreign or national government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

 

“Initial Notice” shall have the meaning specified in Section 5.02.

 

 

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“Long-Term Care Retroceded Business” means the long-term care insurance business
reinsured by the Company pursuant to those Reinsurance Agreements identified as
numbered items 7 and 8 on Schedule B hereto.

 

“Person” means any natural person, firm, limited liability company, general
partnership, limited partnership, joint venture, association, corporation,
trust, Governmental Authority or other entity.

 

“Recapture Agreements” means those agreements identified as numbered items 11
and 12 on Schedule B hereto.

 

“Recaptured Business” means the structured settlement annuity business
recaptured by the Company pursuant to the Recapture Agreements.

 

“Reinsurance Agreements” means those reinsurance agreements relating to the
Reinsured Businesses and which are listed on Schedule B hereto.

 

“Reinsured Businesses” means collectively, the Long-Term Care Retroceded
Business, the Structured Settlement Annuity Reinsured Business and the Variable
Annuity Reinsured Business.

 

“Response” shall have the meaning specified in Section 5.02.

 

“Structured Settlement Annuity Reinsured Business” means the structured
settlement annuity business reinsured by the Company pursuant to those
Reinsurance Agreements identified as numbered items 1 through 6 on Schedule B
hereto.

 

“Termination Date” means the effective date of any termination, in whole or in
part, of this Agreement as provided in Section 6.01.

 

“Variable Annuity Reinsured Business” means the variable annuity business
reinsured by the Company pursuant to those Reinsurance Agreements identified as
numbered items 9 and 10 on Schedule B hereto.

 

                                SECTION 1.02.      Other Terms.  For purposes of
this Agreement, the following terms have the meanings set forth in the sections
or agreements indicated.

 

Term

 

Section

Affiliate

 

Master Agreement

Agreement

 

Preamble

Closing

 

Master Agreement

Company

 

Recitals

Force Majeure

 

Master Agreement

GE Confidential Information

 

Master Agreement

General Electric

 

Preamble

Genworth Confidential Information

 

Master Agreement

Master Agreement

 

Recitals

Services

 

Section 2.01(a)

Service Charges

 

Section 3.01(a)

 

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Term

 

Section

Service Provider

 

Section 4.03

Standard for Services

 

Section 4.01

Subsidiary

 

Master Agreement

Taxes

 

Section 7.03

Third Party Claim

 

Master Agreement

 

ARTICLE II

SERVICES AND TERMS

 

SECTION 2.01.      SERVICES; SCOPE

 

(A)           DURING THE PERIOD COMMENCING ON THE DATE HEREOF AND ENDING ON THE
TERMINATION DATE, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS
AGREEMENT, GNA SHALL PERFORM, OR CAUSE ITS SUBSIDIARIES AND AFFILIATES TO
PERFORM, WITH RESPECT TO THE REINSURED BUSINESSES AND THE RECAPTURED BUSINESS
THE SERVICES LISTED IN SCHEDULE A HERETO (THE “SERVICE(S)”).

 

(B)           THE SERVICES SHALL INCLUDE, AND THE SERVICE CHARGES REFLECT
CHARGES FOR, SUCH MAINTENANCE, SUPPORT, ERROR CORRECTION, TRAINING, UPDATES AND
ENHANCEMENTS NORMALLY AND CUSTOMARILY PERFORMED BY GNA OR ITS APPLICABLE
SUBSIDIARIES AND AFFILIATES IN CONNECTION WITH PROVIDING SUCH SERVICES.

 

(C)           THE SERVICES SHALL NOT INCLUDE ANY SERVICES GNA AND ITS
SUBSIDIARIES AND AFFILIATES PERFORMS OR CAUSES TO BE PERFORMED PURSUANT TO (I)
THAT CERTAIN TRANSITION SERVICES AGREEMENT, DATED AS OF         , 2004, BY AND
AMONG GENERAL ELECTRIC COMPANY, GENERAL ELECTRIC CAPITAL CORPORATION, GEI, INC.,
GEFAHI, GE ASSET MANAGEMENT INCORPORATED, GENWORTH FINANCIAL, INC., AND GNA,
(II) THE REINSURANCE AGREEMENTS OR (III) THAT CERTAIN ADMINISTRATIVE SERVICES
AGREEMENT BY AND BETWEEN THE COMPANY AND FIRST COLONY LIFE INSURANCE COMPANY
RELATING TO THE RECAPTURED BUSINESS.

 

ARTICLE III

COSTS AND DISBURSEMENTS

 

SECTION 3.01.      COSTS AND DISBURSEMENTS.

 

(A)           AS REIMBURSEMENT FOR EXPENSES INCURRED BY GNA AND ITS SUBSIDIARIES
AND AFFILIATES IN PERFORMING THE SERVICES WITH RESPECT TO THE REINSURED
BUSINESSES AND THE RECAPTURED BUSINESS, THE COMPANY SHALL PAY TO GNA WITH
RESPECT TO EACH CALENDAR MONTH ENDING AFTER THE INCEPTION DATE OF EACH
REINSURANCE AGREEMENT LISTED ON SCHEDULE B HERETO, A SERVICE CHARGE (THE
“SERVICE CHARGES”) IN AN AMOUNT CALCULATED IN ACCORDANCE WITH SCHEDULE C HERETO,
AS SUBSEQUENTLY ADJUSTED, IN PART, IN ACCORDANCE WITH THE METHODOLOGY AND
PROCEDURES SET FORTH IN SCHEDULE C.

 

(B)           GNA SHALL DELIVER AN INVOICE TO THE COMPANY ON A MONTHLY BASIS IN
ARREARS FOR THE SERVICE CHARGES DUE TO GNA UNDER THIS AGREEMENT.  THE COMPANY
SHALL PAY THE

 

 

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amount of such invoice to GNA in U.S. dollars within seventy-five (75) days of
the date of such invoice.  In the event that all or any portion of any payment
due GNA pursuant to this Agreement becomes overdue, the portion of the amount
overdue shall bear interest at an annual rate equal to the then current thirty
(30) day U.S. Treasury Bill discount rate on the date that the payment becomes
overdue plus 200 basis points, for the period that the amount is overdue.  As
soon as practicable after receipt by GNA of any reasonable written request by
the Company, GNA shall provide the Company with reasonably detailed data and
documentation sufficient to support the calculation of any amount due to GNA
under this Agreement for the purpose of verifying the accuracy of such
calculation.  If, after reviewing such data and documentation, the Company
disputes GNA’s calculation of any amount due to GNA, then the dispute shall be
resolved pursuant to Article V.

 

ARTICLE IV

STANDARD FOR SERVICE; COMPLIANCE WITH APPLICABLE LAW; LIMITED LIABILITY

 

SECTION 4.01.      STANDARD FOR SERVICE.  EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT (INCLUDING IN SCHEDULE A HERETO), GNA SHALL PERFORM, OR CAUSE ITS
SUBSIDIARIES AND AFFILIATES TO PERFORM, THE SERVICES (A) IN THE SAME MANNER AS
THEY CONDUCT THEIR OWN BUSINESSES NOT SUBJECT TO THIS AGREEMENT AND (B) IN
ACCORDANCE WITH THE ADMINISTRATIVE PERFORMANCE STANDARDS OF GNA AND ITS
APPLICABLE SUBSIDIARIES AND AFFILIATES IN EFFECT ON THE DATE HEREOF, WITH SUCH
REVISIONS TO SUCH STANDARDS AS ARE MADE IN THE ORDINARY COURSE (THE “STANDARD
FOR SERVICES”).

 

SECTION 4.02.      COMPLIANCE WITH APPLICABLE LAW.  GNA SHALL COMPLY, AND SHALL
CAUSE ITS SUBSIDIARIES AND AFFILIATES TO COMPLY, WITH ALL APPLICABLE LAW WHEN
PROVIDING THE SERVICES OR WHEN PERFORMING OBLIGATIONS UNDER THIS AGREEMENT. 
NOTHING IN THIS AGREEMENT SHALL REQUIRE GNA OR ITS SUBSIDIARIES OR AFFILIATES TO
ACT OR REFUSE TO ACT OTHER THAN IN COMPLIANCE WITH APPLICABLE LAW.

 

SECTION 4.03.      LIMITED LIABILITY.  NOTWITHSTANDING THE PROVISIONS OF SECTION
4.01, GNA AND ITS SUBSIDIARIES AND AFFILIATES AND THEIR RESPECTIVE DIRECTORS,
OFFICERS OR EMPLOYEES (OR ANY OF THE HEIRS, EXECUTORS, SUCCESSORS OR ASSIGNS OF
ANY OF THE FOREGOING) (EACH, A “SERVICE PROVIDER”) SHALL HAVE NO LIABILITY TO
THE COMPANY OR ITS SUBSIDIARIES AND AFFILIATES IN EXCESS OF $10,000,000 IN THE
AGGREGATE FOR ANY AND ALL CLAIMS IN CONTRACT, TORT OR OTHERWISE FOR OR IN
CONNECTION WITH ANY BREACH OF ITS OBLIGATIONS UNDER THIS AGREEMENT; PROVIDED,
HOWEVER, THAT SUCH LIMITATION ON LIABILITY SHALL NOT EXTEND TO OR OTHERWISE
LIMIT ANY LIABILITIES THAT RESULT DIRECTLY FROM SUCH SERVICE PROVIDER’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.

 

ARTICLE V

DISPUTE RESOLUTION

 

SECTION 5.01.      GENERAL PROVISIONS.  (A) ANY DISPUTE, CONTROVERSY OR CLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE VALIDITY, INTERPRETATION,
BREACH OR TERMINATION THEREOF OR OTHERWISE RELATING TO ANY OF THE SERVICES
PERFORMED HEREUNDER (A “DISPUTE”), SHALL BE

 

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resolved in accordance with the procedures set forth in this Article V, which
shall be the sole and exclusive procedures for the resolution of any such
Dispute unless otherwise specified below.

 

(B)           COMMENCING WITH THE REQUEST CONTEMPLATED BY SECTION 5.02, ALL
COMMUNICATIONS BETWEEN THE PARTIES OR THEIR REPRESENTATIVES IN CONNECTION WITH
THE ATTEMPTED RESOLUTION OF ANY DISPUTE, INCLUDING ANY MEDIATOR’S EVALUATION
REFERRED TO IN SECTION 5.03, SHALL BE DEEMED TO HAVE BEEN DELIVERED IN
FURTHERANCE OF A DISPUTE SETTLEMENT AND SHALL BE EXEMPT FROM DISCOVERY AND
PRODUCTION, AND SHALL NOT BE ADMISSIBLE IN EVIDENCE FOR ANY REASON (WHETHER AS
AN ADMISSION OR OTHERWISE), IN ANY ARBITRAL OR OTHER PROCEEDING FOR THE
RESOLUTION OF THE DISPUTE.

 

(C)           IN CONNECTION WITH ANY DISPUTE, THE PARTIES EXPRESSLY WAIVE AND
FOREGO ANY RIGHT TO (I) SPECIAL, INDIRECT, PUNITIVE, INCIDENTAL OR
CONSEQUENTIAL, LOST PROFITS, EXEMPLARY, STATUTORILY-ENHANCED OR SIMILAR DAMAGES,
LOSSES OR EXPENSES (PROVIDED THAT ANY SUCH LIABILITY WITH RESPECT TO A THIRD
PARTY CLAIM (AS DEFINED IN THE MASTER AGREEMENT) 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 V
ARE PENDING.  THE PARTIES WILL TAKE SUCH ACTION, IF ANY, REQUIRED TO EFFECTUATE
SUCH TOLLING.

 

SECTION 5.02.      CONSIDERATION BY SENIOR EXECUTIVES.  IF A DISPUTE IS NOT
RESOLVED IN THE NORMAL COURSE OF BUSINESS AT THE OPERATIONAL LEVEL, THE PARTIES
SHALL ATTEMPT IN GOOD FAITH TO RESOLVE SUCH DISPUTE BY NEGOTIATION BETWEEN
EXECUTIVES WHO HOLD, AT A MINIMUM, THE OFFICE OF PRESIDENT AND CEO OF THE
RESPECTIVE BUSINESS ENTITIES INVOLVED IN SUCH DISPUTE.  EITHER PARTY MAY
INITIATE THE EXECUTIVE NEGOTIATION PROCESS BY PROVIDING A WRITTEN NOTICE TO THE
OTHER (THE “INITIAL NOTICE”).  FIFTEEN (15) 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 THIRTY (30) DAYS OF THE DATE OF THE INITIAL NOTICE TO SEEK A RESOLUTION
OF THE DISPUTE.

 

SECTION 5.03.      MEDIATION.  IF A DISPUTE IS NOT RESOLVED BY NEGOTIATION AS
PROVIDED IN SECTION 5.02 WITHIN FORTY-FIVE (45) DAYS FROM THE DELIVERY OF THE
INITIAL NOTICE, THEN EITHER PARTY MAY SUBMIT THE DISPUTE FOR RESOLUTION BY
MEDIATION PURSUANT TO THE CPR INSTITUTE FOR DISPUTE RESOLUTION (THE “CPR”) MODEL
MEDIATION PROCEDURE AS THEN IN EFFECT. THE PARTIES WILL SELECT A MEDIATOR FROM
THE CPR PANELS OF DISTINGUISHED NEUTRALS, BUT SUCH MEDIATOR MUST HAVE PRIOR U.S.
REINSURANCE EXPERIENCE EITHER AS A LAWYER OR AS A PRESENT OR FORMER OFFICER OR
MANAGEMENT EMPLOYEE OF A REINSURANCE COMPANY, BUT NOT OF GNA, OR THE COMPANY, OR
ANY OF THEIR RESPECTIVE AFFILIATES.  EITHER PARTY AT COMMENCEMENT OF THE
MEDIATION MAY ASK THE MEDIATOR TO PROVIDE AN EVALUATION OF THE DISPUTE AND THE
PARTIES’ RELATIVE POSITIONS.

 

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SECTION 5.04.      ARBITRATION.  (A) IF A DISPUTE IS NOT RESOLVED BY MEDIATION
AS PROVIDED IN SECTION 5.03 WITHIN THIRTY (30) DAYS OF THE SELECTION OF A
MEDIATOR (UNLESS THE MEDIATOR CHOOSES TO WITHDRAW SOONER), EITHER PARTY MAY
SUBMIT THE DISPUTE TO BE FINALLY RESOLVED BY ARBITRATION PURSUANT TO THE CPR
RULES FOR NON-ADMINISTERED ARBITRATION AS THEN IN EFFECT (THE “CPR ARBITRATION
RULES”).  THE PARTIES CONSENT TO A SINGLE, CONSOLIDATED ARBITRATION FOR ALL
KNOWN DISPUTES EXISTING AT THE TIME OF THE ARBITRATION AND FOR WHICH ARBITRATION
IS PERMITTED.

 

(B)           THE NEUTRAL ORGANIZATION FOR PURPOSES OF THE CPR ARBITRATION RULES
WILL BE THE CPR. THE ARBITRAL TRIBUNAL SHALL BE COMPOSED OF THREE ARBITRATORS
WHO ARE EACH EXPERIENCED IN THE U.S. REINSURANCE BUSINESS, OF WHOM EACH PARTY
SHALL APPOINT ONE IN ACCORDANCE WITH THE “SCREENED” APPOINTMENT PROCEDURE
PROVIDED IN RULE 5.4 OF THE CPR ARBITRATION RULES.  THE NON-PARTY APPOINTED
ARBITRATOR MUST HAVE PRIOR U.S. REINSURANCE EXPERIENCE AS A PRESENT OR FORMER
OFFICER OR MANAGEMENT EMPLOYEE OF A REINSURANCE COMPANY, BUT NOT OF GNA OR THE
COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES.  THE ARBITRATION SHALL BE
CONDUCTED IN NEW YORK CITY.  EACH PARTY SHALL BE PERMITTED TO PRESENT ITS CASE,
WITNESSES AND EVIDENCE, IF ANY, IN THE PRESENCE OF THE OTHER PARTY. A WRITTEN
TRANSCRIPT OF THE PROCEEDINGS SHALL BE MADE AND FURNISHED TO THE PARTIES. THE
ARBITRATORS SHALL DETERMINE THE DISPUTE IN ACCORDANCE WITH THE LAW OF ILLINOIS,
WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW RULES OR OTHER RULES THAT MIGHT
RENDER SUCH LAW INAPPLICABLE OR UNAVAILABLE, AND SHALL APPLY THIS AGREEMENT
ACCORDING TO ITS TERMS, PROVIDED THAT THE PROVISIONS RELATING TO ARBITRATION
SHALL BE GOVERNED BY THE FEDERAL ARBITRATION ACT, 9 U.S.C. §§ 1 ET SEQ.

 

(C)           THE PARTIES AGREE TO BE BOUND BY ANY AWARD OR ORDER RESULTING FROM
ANY ARBITRATION CONDUCTED HEREUNDER AND FURTHER AGREE THAT JUDGMENT ON ANY AWARD
OR ORDER RESULTING FROM AN ARBITRATION CONDUCTED UNDER THIS SECTION 5.04 MAY BE
ENTERED AND ENFORCED IN ANY COURT HAVING JURISDICTION THEREOF.

 

(D)           EXCEPT AS EXPRESSLY PERMITTED BY THIS AGREEMENT, NO PARTY WILL
COMMENCE OR VOLUNTARILY PARTICIPATE IN ANY COURT ACTION OR PROCEEDING CONCERNING
A DISPUTE, EXCEPT (I) FOR ENFORCEMENT AS CONTEMPLATED BY SECTION 5.04(C) ABOVE,
(II) TO RESTRICT OR VACATE AN ARBITRAL DECISION BASED ON THE GROUNDS SPECIFIED
UNDER APPLICABLE LAW, OR (III) FOR INTERIM RELIEF AS PROVIDED IN PARAGRAPH (E)
BELOW.  FOR PURPOSES OF THE FOREGOING THE PARTIES HERETO SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK.

 

(E)           IN ADDITION TO THE AUTHORITY OTHERWISE CONFERRED ON THE ARBITRAL
TRIBUNAL, THE TRIBUNAL SHALL HAVE THE AUTHORITY TO MAKE SUCH ORDERS FOR INTERIM
RELIEF, INCLUDING INJUNCTIVE RELIEF, AS IT MAY DEEM JUST AND EQUITABLE. 
NOTWITHSTANDING PARAGRAPH (D) ABOVE, EACH PARTY ACKNOWLEDGES THAT IN THE EVENT
OF ANY ACTUAL OR THREATENED BREACH OF CERTAIN OF THE PROVISIONS OF THIS
AGREEMENT, THE REMEDY AT LAW WOULD NOT BE ADEQUATE, AND THEREFORE INJUNCTIVE OR
OTHER INTERIM RELIEF MAY BE SOUGHT IMMEDIATELY TO RESTRAIN SUCH BREACH.  IF THE
TRIBUNAL SHALL NOT HAVE BEEN APPOINTED, EITHER PARTY MAY SEEK INTERIM RELIEF
FROM A COURT HAVING JURISDICTION IF THE AWARD TO WHICH THE APPLICANT MAY BE
ENTITLED MAY BE RENDERED INEFFECTUAL WITHOUT SUCH INTERIM RELIEF. UPON
APPOINTMENT OF THE TRIBUNAL FOLLOWING ANY GRANT OF INTERIM RELIEF BY A COURT,
THE TRIBUNAL MAY AFFIRM OR DISAFFIRM SUCH RELIEF, AND THE PARTIES WILL SEEK
MODIFICATION OR RESCISSION OF THE COURT ACTION AS NECESSARY TO ACCORD WITH THE
TRIBUNAL’S DECISION.

 

(F)            EACH PARTY WILL BEAR ITS OWN ATTORNEYS FEES AND COSTS INCURRED IN
CONNECTION WITH THE RESOLUTION OF ANY DISPUTE IN ACCORDANCE WITH THIS ARTICLE V.

 

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ARTICLE VI

TERMINATION

 

SECTION 6.01.      TERMINATION OF THE AGREEMENT.

 

(A)           THIS AGREEMENT WILL TERMINATE IN ITS ENTIRETY ON THE EARLIEST OF:

 

(I)            THE DATE THE COMPANY’S LIABILITY UNDER ALL OF THE REINSURANCE
AGREEMENTS AND THE RECAPTURED BUSINESS IS TERMINATED IN ACCORDANCE WITH THE
TERMS THEREOF;

 

(II)           THE DATE THAT ALL OF THE REINSURANCE AGREEMENTS ARE TERMINATED IN
ACCORDANCE WITH THE TERMS THEREOF AND THE COMPANY’S LIABILITY UNDER THE
RECAPTURED BUSINESS IS TERMINATED; OR

 

(III)          THE DATE THAT THIS AGREEMENT HAS BEEN TERMINATED WITH RESPECT TO
ALL OF THE REINSURED BUSINESSES AND THE RECAPTURED BUSINESS UNDER SECTION
6.02(E).

 

(B)           THIS AGREEMENT IS SUBJECT TO IMMEDIATE TERMINATION AT THE OPTION
OF THE COMPANY, UPON WRITTEN NOTICE TO GNA, ON THE OCCURRENCE OF ANY OF THE
FOLLOWING EVENTS:

 

(I)            A VOLUNTARY OR INVOLUNTARY PROCEEDING IS COMMENCED IN ANY
JURISDICTION BY OR AGAINST GNA OR ITS SUBSIDIARIES OR AFFILIATES PERFORMING
SERVICES PURSUANT TO THIS AGREEMENT FOR THE PURPOSE OF CONSERVING,
REHABILITATING OR LIQUIDATING GNA OR SUCH SUBSIDIARIES OR AFFILIATES, BUT ONLY
IF THE SERVICES PERFORMED BY THE SUBJECT OF SUCH PROCEEDING ARE NOT ASSUMED OR
PERFORMED BY GNA OR ITS SUBSIDIARIES OR AFFILIATES THAT ARE NOT THE SUBJECT OF
SUCH PROCEEDING; OR

 

(II)           GNA OR ITS SUBSIDIARIES AND AFFILIATES ARE UNABLE TO PERFORM THE
SERVICES REQUIRED UNDER THIS AGREEMENT FOR A PERIOD OF THIRTY (30) CONSECUTIVE
DAYS FOR ANY REASON OTHER THAN AS A RESULT OF A FORCE MAJEURE.

 

(C)           THIS AGREEMENT MAY BE TERMINATED AT ANY TIME UPON THE MUTUAL
WRITTEN CONSENT OF THE PARTIES HERETO, WHICH WRITING SHALL STATE THE EFFECTIVE
DATE OF TERMINATION.

 

SECTION 6.02.      TERMINATION WITH RESPECT TO ANY REINSURED BUSINESS OR
RECAPTURED BUSINESS.  THE TERM OF THIS AGREEMENT WILL TERMINATE WITH RESPECT TO
THE PORTION OF ANY REINSURED BUSINESS UNDER ANY GIVEN REINSURANCE AGREEMENT OR
ANY RECAPTURED BUSINESS ON THE EARLIEST OF:

 

(A)           THE DATE THE COMPANY’S LIABILITY UNDER SUCH REINSURANCE AGREEMENT
IS TERMINATED IN ACCORDANCE WITH THE TERMS THEREOF;

 

(B)           THE DATE THAT SUCH REINSURANCE AGREEMENT IS TERMINATED IN
ACCORDANCE WITH THE TERMS THEREOF;

 

(C)           WITH RESPECT TO ANY RECAPTURED BUSINESS, THE DATE ON WHICH THE
COMPANY’S LIABILITY UNDER SUCH RECAPTURED BUSINESS IS TERMINATED;

 

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(D)           THE DATE THAT THE COMPANY OR ITS ASSIGNEE BECOMES ENTITLED TO
ASSUME ADMINISTRATION OF THE PORTION OF THE REINSURED BUSINESS REINSURED UNDER
SUCH REINSURANCE AGREEMENT OR THE ADMINISTRATION OF THE RECAPTURED BUSINESS;

 

(E)           SEVENTY-FIVE (75) DAYS FOLLOWING WRITTEN NOTICE BY THE COMPANY OF
GNA’S WILLFUL, MATERIAL BREACH OF ITS OBLIGATIONS UNDER ARTICLES II AND IV OF
THIS AGREEMENT WITH RESPECT TO SUCH REINSURED BUSINESS OR RECAPTURED BUSINESS
(PROVIDED THAT THE COMPANY SHALL NOT HAVE THE RIGHT TO TERMINATE THIS AGREEMENT
(A) FOR SO LONG AS THE GNA AND ITS SUBSIDIARIES AND AFFILIATES ARE MAKING GOOD
FAITH EFFORT TO CURE SUCH BREACH, NOT TO EXCEED AN ADDITIONAL ONE HUNDRED EIGHTY
(180) DAYS OR (B) DURING THE PENDENCY OF ANY DISPUTE RESOLUTION PROCEEDINGS AS
SET FORTH IN ARTICLE V REGARDING AN ALLEGED MATERIAL BREACH); OR

 

(F)            SUCH OTHER DATE AS AGREED BY THE COMPANY AND GNA.

 

SECTION 6.03.      EFFECT OF TERMINATION.  UPON TERMINATION OF THIS AGREEMENT IN
ACCORDANCE WITH ITS TERMS, GNA WILL HAVE NO FURTHER OBLIGATION TO PERFORM ANY
SERVICE, AND THE COMPANY WILL HAVE NO OBLIGATION TO PAY ANY SERVICE CHARGES
RELATING TO ANY SERVICE OR MAKE ANY OTHER PAYMENTS UNDER THIS AGREEMENT (OTHER
THAN FOR SERVICES PERFORMED PRIOR TO SUCH TERMINATION).  UPON TERMINATION OF
THIS AGREEMENT WITH RESPECT TO A REINSURED BUSINESS OR A RECAPTURED BUSINESS IN
ACCORDANCE WITH THIS AGREEMENT’S TERMS, GNA WILL HAVE NO FURTHER OBLIGATION TO
PERFORM, OR CAUSE ITS SUBSIDIARIES OR AFFILIATES TO PERFORM ANY SERVICE WITH
RESPECT TO SUCH REINSURED BUSINESS OR SUCH RECAPTURED BUSINESS, AND THE COMPANY
WILL HAVE NO OBLIGATION TO PAY ANY SERVICE CHARGES RELATING TO ANY SERVICE WITH
RESPECT TO SUCH REINSURED BUSINESS OR SUCH RECAPTURED BUSINESS OR MAKE ANY OTHER
PAYMENTS UNDER THIS AGREEMENT WITH RESPECT TO SUCH REINSURED BUSINESS OR
RECAPTURED BUSINESS (OTHER THAN FOR SERVICES PERFORMED PRIOR TO SUCH
TERMINATION).

 

SECTION 6.04.      SURVIVAL.  ARTICLE III (COSTS AND DISBURSEMENTS) (BUT ONLY IN
CONNECTION WITH SERVICE CHARGES INCURRED AND ACCRUED AS OF THE DATE OF
TERMINATION OF THIS AGREEMENT AND THE TERMS OF SECTION 3.01(B) AS APPLIED TO
SUCH SERVICE CHARGES), SECTION 4.03 (LIMITATION OF LIABILITY), ARTICLE V
(DISPUTE RESOLUTION), SECTION 6.03 (EFFECT OF TERMINATION), SECTION 6.04
(SURVIVAL), AND ARTICLE VII (GENERAL PROVISIONS) SHALL SURVIVE THE EXPIRATION OR
OTHER TERMINATION OF THIS AGREEMENT AND REMAIN IN FULL FORCE AND EFFECT.

 

SECTION 6.05.      FORCE MAJEURE.  GNA (AND ANY PERSON ACTING ON ITS BEHALF
INCLUDING ITS SUBSIDIARIES AND AFFILIATES) SHALL NOT HAVE ANY LIABILITY OR
RESPONSIBILITY FOR FAILURE TO FULFILL ANY 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.  AS SOON AS REASONABLY PRACTICABLE AFTER THE OCCURRENCE OF ANY
SUCH EVENT GNA SHALL:  (A) NOTIFY THE COMPANY OF THE NATURE AND EXTENT OF ANY
SUCH FORCE MAJEURE CONDITION AND (B) USE COMMERCIALLY REASONABLE EFFORTS TO
REMOVE ANY SUCH CAUSES AND RESUME PERFORMANCE UNDER THIS AGREEMENT AS SOON AS
FEASIBLE.

 

8

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ARTICLE VII

GENERAL PROVISIONS

 

SECTION 7.01.      SUBCONTRACTORS.  GNA AND ITS SUBSIDIARIES AND AFFILIATES MAY
HIRE OR ENGAGE ONE OR MORE SUBCONTRACTORS TO PERFORM ANY OR ALL OF ITS
OBLIGATIONS UNDER THIS AGREEMENT; PROVIDED THAT IF SUCH SUBCONTRACTORS ARE USED
SOLELY IN CONNECTION WITH THE REINSURED BUSINESS OR THE RECAPTURED BUSINESS,
THEN THE PRIOR WRITTEN CONSENT OF THE COMPANY TO THE USE OF ANY SUCH
SUBCONTRACTORS SHALL BE REQUIRED, WHICH CONSENT WILL NOT BE UNREASONABLY
WITHHELD; PROVIDED FURTHER THAT GNA SHALL IN ALL CASES REMAIN LIABLE FOR ALL ITS
OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
THE SCOPE OF THE SERVICES, THE STANDARD FOR SERVICES AND THE CONTENT OF THE
SERVICES PERFORMED IN RESPECT OF THE REINSURED BUSINESSES AND THE RECAPTURED
BUSINESS.  UNDER NO CIRCUMSTANCES SHALL THE COMPANY BE RESPONSIBLE FOR MAKING
ANY PAYMENTS DIRECTLY TO ANY SUBCONTRACTOR ENGAGED BY GNA OR ITS SUBSIDIARIES OR
AFFILIATES.

 

SECTION 7.02.      ADDITIONAL SERVICES; BOOKS AND RECORDS.

 

(A)           IF, DURING THE TERM OF THIS AGREEMENT, EITHER PARTY IDENTIFIES ANY
ADDITIONAL OR OTHER SERVICE THAT GNA OR ITS SUBSIDIARIES OR AFFILIATES ARE
PERFORMING OR THAT IS NECESSARY FOR GNA TO START PERFORMING IN RESPECT OF THE
REINSURED BUSINESSES AND THE RECAPTURED BUSINESS, THE PARTIES HERETO AGREE TO
NEGOTIATE IN GOOD FAITH WITH RESPECT TO THE SERVICE CHARGE FOR SUCH SERVICE
(PROVIDED THAT SUCH SERVICES ARE OF A TYPE GENERALLY PERFORMED IN RESPECT OF
BUSINESS LIKE THE REINSURED BUSINESSES AND THE RECAPTURED BUSINESS) AND THE
APPLICABLE SERVICE FEES, PAYMENT PROCEDURES, AND OTHER RIGHTS AND OBLIGATIONS
WITH RESPECT THERETO.  TO THE EXTENT PRACTICABLE, SUCH ADDITIONAL OR OTHER
SERVICES SHALL BE PERFORMED ON TERMS SUBSTANTIALLY SIMILAR TO THOSE APPLICABLE
TO SERVICES OF SIMILAR TYPES AND OTHERWISE ON TERMS CONSISTENT WITH THOSE
CONTAINED IN THIS AGREEMENT.

 

(B)           ALL BOOKS, RECORDS AND DATA MAINTAINED BY GNA AND ITS SUBSIDIARIES
AND AFFILIATES WITH RESPECT TO THE PERFORMANCE OF A SERVICE WITH RESPECT TO THE
REINSURED BUSINESSES SHALL BE THE EXCLUSIVE PROPERTY OF GNA AND ITS APPLICABLE
SUBSIDIARIES AND AFFILIATES.  THE COMPANY, AT ITS SOLE COST AND EXPENSE, SHALL
HAVE THE RIGHT TO INSPECT, AND MAKE COPIES OF, ANY SUCH BOOKS, RECORDS AND DATA
DURING REGULAR BUSINESS HOURS UPON REASONABLE ADVANCE NOTICE TO GNA.

 

(C)           ALL BOOKS, RECORDS AND DATA MAINTAINED BY GNA AND ITS SUBSIDIARIES
AND AFFILIATES WITH RESPECT TO THE PERFORMANCE OF A SERVICE WITH RESPECT TO THE
RECAPTURED BUSINESS SHALL BE THE EXCLUSIVE PROPERTY OF THE COMPANY.  THE
COMPANY, AT ITS SOLE COST AND EXPENSE, SHALL HAVE THE RIGHT TO INSPECT, AND MAKE
COPIES OF, ANY SUCH BOOKS, RECORDS AND DATA DURING REGULAR BUSINESS HOURS UPON
REASONABLE ADVANCE NOTICE TO GNA.

 

SECTION 7.03.      TAXES.

 

(A)           EACH PARTY SHALL BE RESPONSIBLE FOR ANY PERSONAL PROPERTY TAXES ON
PROPERTY IT OWNS OR LEASES, FOR FRANCHISE AND PRIVILEGE TAXES ON ITS BUSINESS,
AND FOR TAXES BASED ON ITS NET INCOME OR GROSS RECEIPTS.

 

9

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(B)           THE COMPANY MAY REPORT AND (AS APPROPRIATE) PAY ANY SALES, USE,
EXCISE, VALUE-ADDED, SERVICES, CONSUMPTION, AND OTHER TAXES AND DUTIES (“TAXES”)
WITH RESPECT TO THE REINSURED BUSINESS DIRECTLY IF THE COMPANY PROVIDES GNA WITH
A DIRECT PAY OR EXEMPTION CERTIFICATE.

 

(C)           THE PARTIES AGREE TO COOPERATE WITH EACH OTHER TO ENABLE EACH TO
MORE ACCURATELY DETERMINE ITS OWN TAX LIABILITY AND TO MINIMIZE SUCH LIABILITY
TO THE EXTENT LEGALLY PERMISSIBLE.  GNA’S INVOICES SHALL SEPARATELY STATE THE
AMOUNT OF ANY TAXES GNA IS PROPOSING TO COLLECT FROM THE COMPANY.

 

(D)           GNA SHALL PROMPTLY NOTIFY THE COMPANY OF ANY CLAIM FOR TAXES
ASSERTED BY APPLICABLE TAXING AUTHORITIES WITH RESPECT TO THE REINSURED BUSINESS
FOR WHICH THE COMPANY IS ALLEGED TO BE FINANCIALLY RESPONSIBLE HEREUNDER.  GNA
SHALL COORDINATE WITH THE COMPANY THE RESPONSE TO AND SETTLEMENT OF, ANY SUCH
CLAIM.  NOTWITHSTANDING THE ABOVE, THE COMPANY’S LIABILITY FOR SUCH TAXES IS
CONDITIONED UPON GNA PROVIDING THE COMPANY NOTIFICATION WITHIN TWENTY (20)
BUSINESS DAYS OF RECEIVING ANY PROPOSED ASSESSMENT OF ANY ADDITIONAL TAXES,
INTEREST OR PENALTY DUE BY GNA.

 

(E)           THE COMPANY SHALL BE ENTITLED TO RECEIVE AND TO RETAIN ANY REFUND
OF TAXES PAID TO GNA PURSUANT TO THIS AGREEMENT.  IN THE EVENT GNA SHALL BE
ENTITLED TO RECEIVE A REFUND OF ANY TAXES PAID BY THE COMPANY TO GNA, GNA SHALL
PROMPTLY PAY, OR CAUSE THE PAYMENT OF, SUCH REFUND TO THE COMPANY.

 

SECTION 7.04.      CONFIDENTIAL INFORMATION.  GNA AGREES TO MAINTAIN AND
SAFEGUARD, AND CAUSE ITS SUBSIDIARIES AND AFFILIATES TO MAINTAIN AND SAFEGUARD,
ALL GE CONFIDENTIAL INFORMATION PURSUANT TO SECTION 6.2 OF THE MASTER AGREEMENT
AND THE COMPANY AGREES TO MAINTAIN AND SAFEGUARD, AND CAUSE ITS SUBSIDIARIES AND
AFFILIATES TO MAINTAIN AND SAFEGUARD, ALL GENWORTH CONFIDENTIAL INFORMATION
PURSUANT TO SECTION 6.2 OF THE MASTER AGREEMENT AND EACH PARTY HERETO AGREES
THAT SECTION 6.2 OF THE MASTER AGREEMENT IS HEREBY INCORPORATED BY REFERENCE
INTO, AND MADE A PART OF, THIS AGREEMENT.  THE PARTIES HERETO AGREE TO COMPLY
WITH THE TERMS OF THE BUSINESS ASSOCIATE ADDENDUM ATTACHED AS SCHEDULE D.

 

SECTION 7.05.      NON-DISCLOSURE; PRIVILEGE; CONFLICTS OF INTEREST.  NEITHER
GNA, THE COMPANY NOR ANY OF THEIR RESPECTIVE SUBSIDIARIES OR AFFILIATES SHALL BE
REQUIRED TO DISCLOSE ANY OF THEIR RESPECTIVE TRADE SECRET INFORMATION OR OTHER
INFORMATION THAT PROVIDES GNA AND ITS SUBSIDIARIES AND AFFILIATES, OR THE
COMPANY AND ITS SUBSIDIARIES AND AFFILIATES, AS APPLICABLE, A SIGNIFICANT
COMPETITIVE ADVANTAGE.  FURTHER, NEITHER GNA, THE COMPANY, NOR ANY OF THEIR
RESPECTIVE SUBSIDIARIES OR AFFILIATES WILL BE REQUIRED TO PROVIDE ANY
INFORMATION IN CONNECTION WITH THIS AGREEMENT IF THE PROVISION OF SUCH
INFORMATION WOULD SERVE AS A WAIVER OF ANY ATTORNEY-CLIENT PRIVILEGE OR OTHER
APPLICABLE PRIVILEGE AFFORDED SUCH INFORMATION.  IN NO EVENT WILL GNA OR ITS
SUBSIDIARIES AND AFFILIATES BE REQUIRED TO PERFORM ANY SERVICES IF DOING SO
WOULD CONSTITUTE A CONFLICT OF INTEREST OR A BREACH OF ANY APPLICABLE ETHICAL
RULES GOVERNING THE CONDUCT OF ATTORNEYS; PROVIDED THAT GNA SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TO RESOLVE ANY SUCH CONFLICT OF INTEREST OR
PREVENT ANY BREACH OF ANY SUCH ETHICAL RULES.

 

10

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SECTION 7.06.      HEADINGS AND SCHEDULES.  HEADINGS USED HEREIN ARE NOT A PART
OF THIS AGREEMENT AND SHALL NOT AFFECT THE TERMS HEREOF.  THE ATTACHED SCHEDULES
ARE A PART OF THIS AGREEMENT.

 

SECTION 7.07.      NOTICES.  ALL NOTICES, REQUESTS, DEMANDS AND OTHER
COMMUNICATIONS UNDER THIS AGREEMENT MUST BE IN WRITING AND WILL BE DEEMED TO
HAVE BEEN DULY GIVEN OR MADE AS FOLLOWS:  (A) IF SENT BY REGISTERED OR CERTIFIED
MAIL IN THE UNITED STATES RETURN RECEIPT REQUESTED, UPON RECEIPT; (B) IF SENT BY
REPUTABLE OVERNIGHT AIR COURIER, TWO BUSINESS DAYS AFTER MAILING; (C) IF SENT BY
FACSIMILE TRANSMISSION, WITH A COPY MAILED ON THE SAME DAY IN THE MANNER
PROVIDED IN (A) OR (B) ABOVE, WHEN TRANSMITTED AND RECEIPT IS CONFIRMED BY
TELEPHONE; OR (D) IF OTHERWISE ACTUALLY PERSONALLY DELIVERED, WHEN DELIVERED,
AND SHALL BE DELIVERED AS FOLLOWS:

 

If to GNA:

 

[                          ]
[                          ]
[                          ]
Facsimile:  [                          ]
Attention:  [                          ]

 

With a copy to:

 

[                          ]
[                          ]
[                          ]
Facsimile:  [                          ]
Attention:  [                          ]

 

If to the Company:

 

Union Fidelity Life Insurance Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile: (847) 330-3404
Attention: Chief Financial Officer

 

With a copy to:

 

Union Fidelity Life Insurance Company
200 North Martingale Road
Schaumburg, IL 60173-2096
Facsimile:  (847) 605-3044
Attention:  General Counsel

 

or to such other address or to such other Person as either party may have last
designated by notice to the other party.

 

11

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SECTION 7.08.      SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS,
PERMITTED ASSIGNS AND LEGAL REPRESENTATIVES.  NEITHER THIS AGREEMENT, NOR ANY
RIGHT OR OBLIGATION HEREUNDER, MAY BE ASSIGNED BY ANY PARTY WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER PARTY HERETO.  ANY ASSIGNMENT IN VIOLATION OF THIS
SECTION 7.08 SHALL BE VOID AND SHALL HAVE NO FORCE AND EFFECT.

 

SECTION 7.09.      EXECUTION IN COUNTERPART.  THIS AGREEMENT MAY BE EXECUTED BY
THE PARTIES HERETO IN ANY NUMBER OF COUNTERPARTS, AND BY EACH OF THE PARTIES
HERETO IN SEPARATE COUNTERPARTS, EACH OF WHICH COUNTERPARTS, WHEN SO EXECUTED
AND DELIVERED, SHALL BE DEEMED TO BE AN ORIGINAL, BUT ALL SUCH COUNTERPARTS
SHALL TOGETHER CONSTITUTE BUT ONE AND THE SAME INSTRUMENT.

 

SECTION 7.10.      CURRENCY.  WHENEVER THE WORD “DOLLARS” OR THE “$” SIGN APPEAR
IN THIS AGREEMENT, THEY SHALL BE CONSTRUED TO MEAN UNITED STATES DOLLARS, AND
ALL TRANSACTIONS UNDER THIS AGREEMENT SHALL BE IN UNITED STATES DOLLARS.

 

SECTION 7.11.      AMENDMENTS.  THIS AGREEMENT MAY NOT BE CHANGED, ALTERED OR
MODIFIED UNLESS THE SAME SHALL BE IN WRITING EXECUTED BY GNA AND THE COMPANY.

 

SECTION 7.12.      GOVERNING LAW.  THIS AGREEMENT WILL BE CONSTRUED, PERFORMED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING
EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS THEREOF TO THE EXTENT SUCH
PRINCIPLES OR RULES WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.

 

SECTION 7.13.      ENTIRE AGREEMENT; SEVERABILITY.  (A)  THIS AGREEMENT
CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS,
UNDERSTANDINGS, STATEMENTS, REPRESENTATIONS AND WARRANTIES, NEGOTIATIONS AND
DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES AND THERE ARE NO GENERAL OR
SPECIFIC WARRANTIES, REPRESENTATIONS OR OTHER AGREEMENTS BY OR AMONG THE PARTIES
IN CONNECTION WITH THE ENTERING INTO OF THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF EXCEPT AS SPECIFICALLY SET FORTH OR CONTEMPLATED HEREIN.

 

(B)           IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE VOID OR
UNENFORCEABLE, IN WHOLE OR IN PART, (I) SUCH HOLDING SHALL NOT AFFECT THE
VALIDITY AND ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT, INCLUDING ANY
OTHER PROVISION, PARAGRAPH OR SUBPARAGRAPH, AND (II) THE PARTIES AGREE TO
ATTEMPT IN GOOD FAITH TO REFORM SUCH VOID OR UNENFORCEABLE PROVISION TO THE
EXTENT NECESSARY TO RENDER SUCH PROVISION ENFORCEABLE AND TO CARRY OUT ITS
ORIGINAL INTENT.

 

SECTION 7.14.      NO WAIVER; PRESERVATION OF REMEDIES.  NO CONSENT OR WAIVER,
EXPRESS OR IMPLIED, BY ANY PARTY TO OR OF ANY BREACH OR DEFAULT BY ANY OTHER
PARTY IN THE PERFORMANCE BY SUCH OTHER PARTY OF ITS OBLIGATIONS HEREUNDER SHALL
BE DEEMED OR CONSTRUED TO BE A CONSENT OR WAIVER TO OR OF ANY OTHER BREACH OR
DEFAULT IN THE PERFORMANCE OF OBLIGATIONS HEREUNDER BY SUCH OTHER PARTY
HEREUNDER.  FAILURE ON THE PART OF ANY PARTY TO COMPLAIN OF ANY ACT OR FAILURE
TO ACT OF ANY OTHER PARTY OR TO DECLARE ANY OTHER PARTY IN DEFAULT, IRRESPECTIVE
OF HOW LONG SUCH FAILURE CONTINUES, SHALL NOT CONSTITUTE A WAIVER BY SUCH FIRST
PARTY OF ANY OF ITS RIGHTS HEREUNDER.  THE RIGHTS AND REMEDIES PROVIDED ARE
CUMULATIVE AND ARE NOT EXCLUSIVE OF ANY RIGHTS OR REMEDIES THAT ANY PARTY MAY
OTHERWISE HAVE AT LAW OR EQUITY.

 

12

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SECTION 7.15.      COOPERATION.  EACH PARTY HERETO SHALL COOPERATE FULLY WITH
THE OTHER IN ALL REASONABLE RESPECTS IN ORDER TO ACCOMPLISH THE OBJECTIVES OF
THIS AGREEMENT INCLUDING MAKING AVAILABLE TO EACH THEIR RESPECTIVE OFFICERS AND
EMPLOYEES FOR INTERVIEWS AND MEETINGS WITH GOVERNMENTAL AUTHORITIES AND
FURNISHING ANY ADDITIONAL ASSISTANCE, INFORMATION AND DOCUMENTS AS MAY BE
REASONABLY REQUESTED BY A PARTY FROM TIME TO TIME.

 

SECTION 7.16.      THIRD PARTY BENEFICIARY.  NOTHING IN THIS AGREEMENT WILL
CONFER ANY RIGHTS UPON ANY PERSON THAT IS NOT A PARTY OR A SUCCESSOR OR
PERMITTED ASSIGNEE OF A PARTY TO THIS AGREEMENT.

 

SECTION 7.17.      NEGOTIATED AGREEMENT.  THIS AGREEMENT HAS BEEN NEGOTIATED BY
THE PARTIES AND THE FACT THAT THE INITIAL AND FINAL DRAFT WILL HAVE BEEN
PREPARED BY EITHER PARTY OR AN INTERMEDIARY WILL NOT GIVE RISE TO ANY
PRESUMPTION FOR OR AGAINST ANY PARTY TO THIS AGREEMENT OR BE USED IN ANY RESPECT
OR FORUM IN THE CONSTRUCTION OR INTERPRETATION OF THIS AGREEMENT OR ANY OF ITS
PROVISIONS.

 

SECTION 7.18.      INTERPRETATION.  WHEREVER THE WORDS “INCLUDE,” “INCLUDES” OR
“INCLUDING” ARE USED IN THIS AGREEMENT, THEY SHALL BE DEEMED TO BE FOLLOWED BY
THE WORDS “WITHOUT LIMITATION.”  IN ADDITION, 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 ARTICLE, SECTION, PARAGRAPH, AND SCHEDULE ARE REFERENCES
TO THE ARTICLES, SECTIONS, PARAGRAPHS, AND SCHEDULES TO THIS AGREEMENT UNLESS
OTHERWISE SPECIFIED, (C) PROVISIONS SHALL APPLY, WHEN APPROPRIATE, TO SUCCESSIVE
EVENTS AND TRANSACTIONS, AND (D) 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.

 

SECTION 7.19.      NO RIGHT TO SET-OFF.  THE COMPANY SHALL PAY THE FULL AMOUNT
OF COSTS AND DISBURSEMENTS INCURRED UNDER THIS AGREEMENT, AND SHALL NOT SET-OFF,
COUNTERCLAIM OR OTHERWISE WITHHOLD ANY OTHER AMOUNT OWED TO GNA ON ACCOUNT OF
ANY OBLIGATION OWED BY GNA TO THE COMPANY.

 

[SIGNATURE PAGE FOLLOWS]

 

13

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

 

 

 

GNA CORPORATION

 

 

 

 

By:

/s/ Ward E. Bobitz

 

 

Name:

Ward E. Bobitz

 

 

Title:

Senior Vice President

 

 

 

 

UNION FIDELITY LIFE INSURANCE COMPANY

 

 

 

 

By:

/s/ Glenn Joppa

 

 

Name:

Glenn Joppa

 

 

Title:

Senior Vice President

 

14

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SCHEDULE A

 

SERVICES

 

The Services are broadly defined as activities performed by GNA and its
Subsidiaries and Affiliates that benefit the Reinsured Businesses and the
Recaptured Business.  The Services are more fully defined, without limitation,
below by functional area under the general headings “Business Overhead Services”
and “Corporate Overhead Services.”

 

Business Overhead Services

 

The services below will be provided by the “WIM” business unit of GNA and its
Subsidiaries and Affiliates with regards to the Structured Settlement Annuity
Reinsured Business, the Recaptured Business and the Variable Annuity Reinsured
Business:

 

Executive:
General support, counsel, strategy and leadership provided by WIM’s Chief
Executive Officer.

 

Human Resources:
General business level Human Resource related activities including but not
limited to leadership development, employee recruitment and staffing,
implementation of compensation policies and practices, payroll and benefit
administration, organizational communication, training, general security and
employee issue resolution and guidance.

 

Finance:
Cost of finance activities including but not limited to product financial
support and analysis, account reconciliations, state reporting, product
profitability analysis, investment income planning & analysis, expense
management, audit support, statutory & GAAP accounting, reporting & analysis and
ad hoc financial analysis.

 

Legal/Compliance:
Cost of support and coordination of litigation, government relations, human
resource, intellectual property, insurance regulatory, consumer privacy,
contract, compliance, and public relations matters.

 

Risk:
Cost of Risk Management and reinsurance support—Monitor production vs. authority
limits, monitor and review key risk measures.  General oversight of inforce
product performance analysis and reviews.  Reinsurance oversight and treaty
management including settlement with reinsurers.

 

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Facilities:
Campus expenses including building rent and maintenance, parking garage,
cafeteria, campus lawn care and utilities.

 

Information Technology:
General business technology infrastructure costs including but not limited to
general management, help desk assistance, data center management, disaster
recovery plans and digitization of processes.

 

Six Sigma Quality:
Costs including business project management and process improvement coaching,
execution and leadership.

 

Product Management:
Costs for product line managers to manage inforce policies and general product
line maintenance activities such as risk assessment, return on equity (“ROE”)
variance analysis and related ROE improvement projects.

 

Operations:
Costs including management, project leadership and administrative support for
service operations supporting customers, policyholders and other stakeholders.

 

Other:
Costs including corporate insurance allocation to product lines (e.g., cost of
building insurance and other property, plant and equipment).

 

Retention:
Costs including monitoring of inforce policy retention levels, design and
execute programs to retain inforce business.

 

Corporate Overhead Services

 

The services listed below will be provided by the “HQ” or corporate functions at
GNA with regard to each of the Reinsured Businesses and Recaptured Business:

 

Executive Office:
Costs including general support, counsel, strategy and leadership provided by
CEO, various HQ business insurance charges and allocations.

 

Human Resources:
Costs of general HR related activities such as leadership development, employee
recruitment and

 

2

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staffing, compensation policies and practices, payroll and benefit
administration, organizational communication, that which is currently known as
the “GEFA University” learning center including online course development and
administration, physical security of the business locations and employee issue
resolution and guidance.

 

Actuarial Department and Capital Management:
Costs including rating agency coordination such as answering queries, making
presentations, and providing other required information for rating agencies;
state insurance department regulatory support, NAIC lobbying and investor
relations, including issues related to risk based capital; completion of various
actuarial and capital management functions such as: reserve calculations,
experience analysis, asset/liability management, cash flow testing support,
dividend forecasting, capital management, reinsurance and capital markets
support.

 

Finance:
HQ related finance costs, such as business level financial planning and
analysis, Statutory and GAAP accounting, reinsurance accounting, reporting and
analysis, annual statement (“blue book”) preparation and related disclosures and
schedules, statutory audit support, tax information needed to prepare returns,
treasury services, financial systems related support, maintenance and
infrastructure, technical accounting expertise.

 

Product Management:
Costs including general product management and product marketing compliance,
support pricing and retention initiatives.

 

Legal:
Costs including support and coordination of litigation, government relations,
human resource, intellectual property, insurance regulatory, consumer privacy,
contract, compliance, and public relations matters.

 

Risk:
Costs including business risk policies (currently known as “Policy 5.0/6.0”)
development and monitoring, treaty management, reinsurance and controllership
oversight.  These policies are developed and implemented by the Risk team with
others at Headquarters to manage assets and liabilities, control business risks
associated with investments, controllership, systems infrastructure, process
management, etc. Various metrics are used to “trigger” leadership decision
points in an effort to reduce business risks.   Includes the leadership of
projects to reduce the business risks associated with various systems and
processes across the business.

 

Sourcing (Purchasing) and Facilities:
Costs including sourcing related services including Purchasing card (“P-card”)
Administration, Oracle sourcing/purchasing/receiving system (know as the “SSS
System”) Administration, requisition processing, competitive bidding/auction
services, spend data tracking/analysis, and

 

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contract definition/negotiation.  Leadership of certain expense reduction
projects currently known as “Bullet Trains” (which focus across the business on
reducing individual expense categories (PC leasing, postage, consulting,
telecommunications, office supplies, etc.) and other projects related to the
increase in purchasing efficiency and reduction of costs.

 

IT and e-Solutions:
General management costs associated with IT infrastructure, management of on and
off shore contractors, help desk, asset management (PC’s, printers, servers,
etc.), email service, Wide Area Networks (WAN), desktop support (visiting actual
users to assist them with IT needs), web hosting, Unix and NT system
administration, global computer operations, intellectual property, contract and
licenses of software, services and hardware, U.S.-based consulting and control
over remote infrastructure (for example, those systems currently housed in
Alpharetta, GA).
Costs of HQ security team, who provides disaster recovery, including risk
analysis & coordination of all IT associated with Disaster Recovery.  In
addition, security includes coordination with all local business security
officers, relating to intrusion detection, anti-virus and other protections of
systems.
Costs including project management, oversight and project manager certification,
using several industry standard processes including Six Sigma “DMAIC” process
improvement and other process improvement/development regimes.
Costs of developing and monitoring architectural plans for future operations
including technology related standards, guidelines and polices.
Costs of IT Vendor Management — includes negotiations and oversight for vendor
agreements on hardware, software and services.
Costs of IT Solutions — delivers IT solutions that meet business needs through
digitization of processes and deployment of web applications.

 

Operations Excellence:
Costs of Consolidation, Analysis, Management Strategy, and Leadership for
Operations and Shared Services.  Provide strategic leadership and oversight to
all operations departments, ensuring that best practices are shared.
Costs of managing services used by all GEFA businesses, including Xerox (current
outsourced document processing provider), “1-800 Think GE” call center (a point
of contact for all GEFA products), and One Front Door (inbound imaging
strategy).

 

Changes in Services

 

The Business Overhead Services and Corporate Overhead Services shall include
such other comparable and/or successor Services implemented or maintained from
time to time by GNA and its Subsidiaries and Affiliates.

 

4

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SCHEDULE B

 

REINSURED BUSINESSES and RECAPTURED BUSINESS

 

Structured Settlement Annuities

 

1.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and GE Life and Annuity Assurance Company, a Virginia domiciled life
insurance company

 

2.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and Federal Home Life Insurance Company, a Virginia domiciled life
insurance company

 

3.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and First Colony Life Insurance Company, a Virginia domiciled life
insurance company

 

4.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and General Electric Capital Assurance Company, a Delaware domiciled
life insurance company

 

5.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and GE Capital Life Assurance Company of New York, a New York domiciled
life insurance company

 

6.       Coinsurance Agreement, dated as of         , 2004, by and between the
Company and American Mayflower Life Insurance Company of New York, a New York
domiciled life insurance company

 

Long Term Care

 

7.       Retrocession Agreement, dated as of       , 2004, by and between the
Company and General Electric Capital Assurance Company, a Delaware domiciled
life insurance company

 

8.       Retrocession Agreement, dated as of       , 2004, by and between the
Company and GE Capital Life Assurance Company of New York, a New York domiciled
life insurance company

 

Variable Annuities

 

9.       Reinsurance Agreement, dated as of       , 2004, by and between the
Company and GE Life and Annuity Assurance Company, a Virginia domiciled life
insurance company

 

10.     Reinsurance Agreement, dated as of       , 2004, by and between the
Company and GE Capital Life Assurance Company of New York, a New York domiciled
life insurance company

 

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Structured Settlement Annuities:

 

11.     Recapture Agreement dated as of         , 2004, by and between the
Company and GE Life and Annuity Assurance Company, a Virginia domiciled life
insurance company

 

12.     Recapture Agreement dated as of         , 2004, by and between the
Company and GE Capital Life Assurance Company of New York, a New York domiciled
life insurance company

 

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SCHEDULE C

 

SERVICE CHARGES

 

The “Annual Expense Reimbursement Factors” used to calculate the Service Charges
for each respective line of business are as follows:

 

Structured Settlement Annuity Reinsured Business and Recaptured Business:

 

Corporate Overhead Factor

 

$** per Annum

 

 

 

 

 

Business Overhead Factor

 

$** per Policy

 

 

Variable Annuity Reinsured Business

 

Corporate Overhead Factor

 

$** per Annum

 

 

 

 

 

Business Overhead Factor

 

$** per Policy

 

 

Long-Term Care Retroceded Business

 

Corporate Overhead Factor

 

$** per Annum

 

 

The Service Charges will be determined quarterly and billed to the Company in
three equal installments at the end of the month during the quarter.  Each
monthly installment billed for a particular line of business will be determined
by (a) multiplying the actual number of units at the beginning of the quarter
covered by this Agreement times the Business Overhead Factor (divided by
twelve), if applicable, and (b) adding the applicable Corporate Overhead Factor
(divided by twelve).

 

The Annual Expense Reimbursement Factors for each respective line of business
will be adjusted (i) for the year beginning January 1, 2005 and, thereafter,
every three (3) years during the term of this Agreement based on a triennial
cost/time study prepared in accordance with the methodology set forth below (the
“Triennial Study”) and (ii) for the years between the Triennial Studies based on
a report setting forth the Annual Expense Reimbursement Factors prepared in
accordance with the methodology set forth below (the “Annual Expense
Reimbursement Factors Report”).

 

(a) Triennial Study.  As soon as practicable (and in any event within sixty (60)
days) prior to January 1, 2005 and prior to the beginning of every third
calendar year thereafter during the term of this Agreement, GNA shall cause to
be prepared and delivered to the Company the Triennial Study which sets forth
the Annual Expense Reimbursement Factors for the next calendar year, together
with all supporting data used in preparing the Triennial Study and work papers,
in reasonable detail, setting forth the determination of such Annual Expense
Reimbursement Factors based on such Triennial Study (such documents, together
with the Triennial Study, the “Triennial Study Documents”).

 

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(b) Annual Expense Reimbursement Factors Report.  As soon as practicable (and in
any event within thirty (30) days) prior to January 1, 2006 and prior to the
beginning of each calendar year thereafter in which no Triennial Study is
prepared, GNA shall cause to be prepared and delivered to the Company the Annual
Expense Reimbursement Factors Report, together with all supporting data used in
preparing the Annual Expense Reimbursement Factors Report and work papers, in
reasonable detail, setting forth the determination of such Annual Expense
Reimbursement Factors for the next calendar year (such documents, together with
the Annual Expense Reimbursement Factors Report, the “Annual Expense
Reimbursement Factors Documents”).

 

(c) Methodology.  At the time of the Triennial Study, historical costs (to
include costs for those services identified as Business Overhead Services and
Corporate Overhead Services in Schedule A and any changes thereto pursuant to
Schedule A) will be determined for the Annual Expense Reimbursement Factors
identified above.  For a given Business Overhead Factor (identified above in
this Schedule C) the identified or allocated costs, as applicable, will be
divided by the total number of remaining Reinsured Policies, Reinsured Contracts
(as such terms are defined in the applicable Reinsurance Agreement) or Insurance
Contracts (as such term is defined in the Administrative Services Agreement by
and between Union Fidelity Life Insurance Company and First Colony Life
Insurance Company effective as of [  ], 2004), as applicable, and the Company’s
current in-force business to derive an historical cost per unit.  The historical
cost per unit will be used as a prospective cost per unit for the next calendar
year.  For the purposes of allocating costs of providing Business Overhead
Services, actual identified costs allocable to each of the lines of business
specified above (Structured Settlement Annuity Reinsured Business, Recaptured
Business and Variable Annuity Reinsured Business) shall be allocated to such
lines of business.  For the purpose of allocating costs of providing the
Corporate Overhead Services, the historical costs of such services shall be
allocated equally to each of the lines of business specified above.

 

For the two succeeding years in the period between the Triennial Studies the
historical dollar amounts by Annual Expense Reimbursement Factors will be
adjusted (rolled forward) for current year cost changes agreed to by GNA and the
Company (in accordance with the procedures set forth above).  The costs for
Business Overhead Services will then be divided by the total number of remaining
Reinsured Policies, Reinsured Contracts (as such terms are defined in the
applicable Reinsurance Agreement) or Insurance Contracts (as such term is
defined in the Administrative Services Agreement by and between Union Fidelity
Life Insurance Company and First Colony Life Insurance Company effective as of
[  ], 2004) for the current period to determine a prospective cost per unit for
the next calendar year.  The costs for Corporate Overhead Services shall be
allocated equally to each of the lines of business specified above.

 

An additional adjustment, positive or negative, to the prospective cost per unit
for Business Overhead Services or per annum for Corporate Overhead Services
determined by either the Triennial Study or the two succeeding years may be
negotiated between the parties.  The additional adjustment is for special
projected costs or benefits of productivity, process improvements, inflation,
loss of scale, and any other cost variation that was not included in the prior
Triennial Study or the succeeding roll forward.

 

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The combined prospective unit cost, per annum cost and additional adjustment for
a respective line of business is the Annual Expense Reimbursement Factor for
that line of business.

 

(d) Review of Documents.  Following the delivery of the Annual Expense
Reimbursement Factors Documents or the Triennial Study Documents, as applicable,
GNA shall (i) provide to the Company or its designated representative copies of
such additional work papers and other documents relating to its preparation of
the Annual Expense Reimbursement Factors Report or Triennial Study, as
applicable, as the Company or its designated representative may reasonably
request, including, without limitation, claims files and practices and (ii)
cooperate with, and make its personnel and facilities reasonably available to,
the Company and the Company’s designated representative for the purpose of
providing such other information as the Company or the Company’s designated
representative may reasonably request concerning Annual Expense Reimbursement
Factor Documents or the Triennial Study Documents, as applicable, and the
calculation of the Annual Expense Reimbursement Factors.

 

(e) Notice of Disagreement.  In the event that the Company has any disagreement
with any of the Annual Expense Reimbursement Factor Documents or the Triennial
Study Documents, as applicable, the Company shall give written notice of all
such disagreements (a “Notice of Disagreement”) to GNA within thirty (30) days
after the Annual Expense Reimbursement Factors Documents or the Triennial Study
Documents, as applicable, are delivered to the Company.  Any Notice of
Disagreement shall set forth each item in disagreement and shall provide
reasonable specificity as to the basis for each disagreement and shall specify
the total adjustment to the Annual Expense Reimbursement Factors as proposed by
GNA as a result of such items in disagreement.

 

(f) Dispute Resolution.  If the Company does not deliver a Notice of
Disagreement to the Company within such thirty (30) day period, the Annual
Expense Reimbursement Factors Documents and the Triennial Study Documents, as
applicable, shall be final and binding upon the parties hereto and shall
constitute the final calculation of the Annual Expense Reimbursement Factors for
the next calendar year.  If the Company delivers a Notice of Disagreement to GNA
within such thirty (30) day period, the parties shall (and shall cause their
respective designated representatives to) negotiate in good faith to resolve all
disagreements as promptly as practicable.  Any changes in the Annual Expense
Reimbursement Factors, if any, that are agreed to by the Company and GNA within
sixty (60) days of the aforementioned delivery of the Annual Expense
Reimbursement Factors Documents or the Triennial Study Documents, as applicable,
shall be incorporated into a final calculation of the Annual Expense
Reimbursement Factors.  If the parties and their respective designated
representatives are unable to resolve all disagreements within sixty (60) days
of delivery of the Annual Expense Reimbursement Factors Documents or the
Triennial Study Documents, as applicable, then all unresolved disagreements will
be submitted within ten (10) days after the end of such sixty (60) day period
for resolution in accordance herewith to an independent certified public
accounting firm of national standing and reputation (the “Accounting Firm”)
mutually acceptable to the Company and GNA.  The parties shall cooperate in good
faith with the Accounting Firm and shall give the Accounting Firm access to all
data and other information requested by the Accounting Firm for purposes of such
resolution.  The Accounting Firm shall, within thirty (30) days after its
engagement, deliver to the Company and GNA a definitive calculation of the

 

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Business Overhead Factors, which shall be final and binding upon the parties
hereto and shall be so reflected in the calculation of the Business Overhead
Factors.  The Company and GNA shall each pay one-half of the fees and expenses
of the Accounting Firm.

 

(g) Service Charges Pending Resolution.  In the event of a dispute with respect
to any Annual Expense Reimbursement Factors for the next succeeding Calendar
year, the Company and GNA agree that the Annual Expense Reimbursement Factors
then in effect under this Agreement shall remain in effect pending resolution of
such dispute and adjustment, if any, in accordance with the dispute resolution
procedure set forth in paragraph (f) above.

 

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SCHEDULE D

 

BUSINESS ASSOCIATE ADDENDUM

 

I.              Purpose.

 

In order to disclose certain information to GNA (for purposes of this Addendum,
the “Provider”) under this Addendum, some of which may constitute Protected
Health Information (defined below), the Company (for purposes of this Addendum,
the “Recipient”) and Provider mutually agree to comply (and Provider shall cause
its Subsidiaries and Affiliates performing Services to comply) with the terms of
this Addendum for the purpose of satisfying the requirements of the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its
implementing privacy regulations at 45 C.F.R. Parts 160-164 (“HIPAA Privacy
Rule”).   These provisions shall apply to Provider and its Subsidiaries and
Affiliates to the extent that any or Provider or its Subsidiaries and Affiliates
is considered a “Business Associate” under the HIPAA Privacy Rule and all
references in this section to Business Associates shall refer to Provider or
such Subsidiary or Affiliate.  Capitalized terms not otherwise defined herein
shall have the meaning assigned in the Agreement.  Notwithstanding anything else
to the contrary in the Agreement, in the event of a conflict between this
Addendum and the Agreement, the terms of this Addendum shall prevail.

 

II.            Permitted Uses and Disclosures.

 

A.            Business Associate agrees to use or disclose Protected Health
Information (“PHI”) that it creates for or receives from Recipient or its
Subsidiaries only as follows.  The capitalized term “Protected Health
Information or PHI” has the meaning set forth in 45 Code of Federal Regulations
Section 164.501, as amended from time to time.  Generally, this term means
individually identifiable health information including, without limitation, all
information, data and materials, including without limitation, demographic,
medical and financial information, that relates to the past, present, or future
physical or mental health or condition of an individual; the provision of health
care to an individual; or the past present, or future payment for the provision
of health care to an individual; and that identifies the individual or with
respect to which there is a reasonable basis to believe the information can be
used to identify the individual.  This definition shall include any demographic
information concerning members and participants in, and applicants for,
Recipient’s or its Subsidiaries’ health benefit plans.  All other terms used in
this Addendum shall have the meanings set forth in the applicable definitions
under the HIPAA Privacy Rule.

 

B.            Functions and Activities on Company’s Behalf.  Business Associate
is permitted to use and disclose PHI it creates for or receives from Recipient
or its Subsidiaries only for the purposes described in this Addendum or the
Agreement that are not inconsistent with the provisions of this Addendum, or as
required by law, or following receipt of prior written approval from whichever
of the Recipient or its Subsidiary or Affiliate for which the relevant PHI was
created or from which the relevant PHI was received.  In addition to these
specific requirements below, Business Associate may use or disclose PHI only in
a manner that would not violate the HIPAA Privacy Rule if done by the Recipient
or its Subsidiaries.

 

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C.            Business Associate’s Operations.  Business Associate is permitted
by this Agreement to use PHI it creates for or receives from Recipient or its
Subsidiaries: (i) if such use is reasonably necessary for Business Associate’s
proper management and administration; and (ii) as reasonably necessary to carry
out Business Associate’s legal responsibilities. Business Associate is permitted
to disclose PHI it creates for or receives from Recipient or its Subsidiaries
for the purposes identified in this Section only if the following conditions are
met:

 

1.     The disclosure is required by law; or

 

2.     The disclosure is reasonably necessary to Business Associate’s proper
management and administration, and Business Associate obtains reasonable
assurances in writing from any person or organization to which Business
Associate will disclose such PHI that the person or organization will:

 

a.             Hold such PHI as confidential and use or further disclose it only
for the purpose for which Business Associate disclosed it to the person or
organization or as required by law; and

 

b.             Notify Business Associate (who will in turn promptly notify
whichever of the Recipient or its Subsidiary or Affiliate for which the relevant
PHI was created or from which the relevant PHI was received) of any instance of
which the person or organization becomes aware in which the confidentiality of
such PHI was breached.

 

D.            Minimum Necessary Standard.  In performing the functions and
activities on Recipient’s or its Subsidiaries’ behalf pursuant to the Agreement,
Business Associate agrees to use, disclose or request only the minimum necessary
PHI to accomplish the purpose of the use, disclosure or request.  Business
Associate must have in place policies and procedures that limit the PHI
disclosed to meet this minimum necessary standard.

 

E.             Prohibition on Unauthorized Use or Disclosure.  Business
Associate will neither use nor disclose PHI it creates or receives for or from
Recipient, its Subsidiaries, or from another business associate of Recipient or
its Subsidiaries, except as permitted or required by this Addendum or the
Agreement that are not inconsistent with the provisions of this Addendum, or as
required by law, or following receipt of prior written approval from whichever
of the Recipient or its Subsidiary or Affiliate for which the relevant PHI was
created or from which the relevant PHI was received.

 

F.             De-identification of Information.  Business Associate agrees
neither to de-identify PHI it creates for or receives from Recipient or its
Subsidiaries or from another business associate of Recipient or its
Subsidiaries, nor use or disclose such de-identified PHI, unless such
de-identification is expressly permitted under the terms and conditions of this
Addendum or the Agreement and related to Recipient’s or its Subsidiaries’
activities for purposes of “treatment”, “payment” or “health care operations”,
as those terms are defined under the HIPAA Privacy Rule.  De-identification of
PHI, other than as expressly permitted under the terms and conditions of the
Addendum for Business Associate to perform services for Recipient or its
Subsidiaries, is

 

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not a permitted use of PHI under this Addendum.  Business Associate further
agrees that it will not create a “Limited Data Set” as defined by the HIPAA
Privacy Rule using PHI it creates or receives, or receives from another business
associate of Recipient or its Subsidiaries, nor use or disclose such Limited
Data Set unless: (i) such creation, use or disclosure is expressly permitted
under the terms and conditions of this Addendum or the Agreement that are not
inconsistent with the provisions of this Addendum; and such creation, use or
disclosure is for services provided by Business Associate that relate to
Recipient’s or its Subsidiaries’ activities for purposes of “treatment”,
“payment” or “health care operations”, as those terms are defined under the
HIPAA Privacy Rule.

 

G.            Information Safeguards.  Business Associate will develop,
document, implement, maintain and use appropriate administrative, technical and
physical safeguards to preserve the integrity and confidentiality of and to
prevent non-permitted use or disclosure of PHI created for or received from
Recipient or its Subsidiaries.  These safeguards must be appropriate to the size
and complexity of Business Associate’s operations and the nature and scope of
its activities.  Business Associate agrees that these safeguards will meet any
applicable requirements set forth by the U.S. Department of Health and Human
Services, including (as of the effective date or as of the compliance date,
whichever is applicable) any requirements set forth in the final HIPAA security
regulations.  Business Associate agrees to mitigate, to the extent practicable,
any harmful effect that is known to Business Associate resulting from a use or
disclosure of PHI by Business Associate in violation of the requirements of this
Addendum.

 

III.           Conducting Standard Transactions.  In the course of performing
services for Recipient or its Subsidiaries, to the extent that Business
Associate will conduct Standard Transactions for or on behalf of Recipient or
its Subsidiaries, Business Associate will comply, and will require any
subcontractor or agent involved with the conduct of such Standard Transactions
to comply, with each applicable requirement of 45 C.F.R. Part 162.  “Standard
Transaction(s)” shall mean a transaction that complies with the standards set
forth at 45 C.F.R. parts 160 and 162.  Further, Business Associate will not
enter into, or permit its subcontractors or agents to enter into, any trading
partner agreement in connection with the conduct of Standard Transactions for or
on behalf of the Recipient or its Subsidiaries that:

 

a.             Changes the definition, data condition, or use of a data element
or segment in a Standard Transaction;

 

b.             Adds any data element or segment to the maximum defined data set;

 

c.             Uses any code or data element that is marked “not used” in the
Standard Transaction’s implementation specification or is not in the Standard
Transaction’s implementation specification; or

 

d.             Changes the meaning or intent of the Standard Transaction’s
implementation specification.

 

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IV.           Sub-Contractors, Agents or Other Representatives.  Business
Associate will require any of its subcontractors, agents or other
representatives to which Business Associate is permitted by this Addendum or the
Agreement (or is otherwise given Recipient’s or the relevant Subsidiary’s or
Affiliate’s prior written approval) to disclose any of the PHI Business
Associate creates or receives for or from Recipient or its Subsidiaries, to
provide reasonable assurances in writing that subcontractor or agent will comply
with the same restrictions and conditions that apply to the Business Associate
under the terms and conditions of this Addendum with respect to such PHI.

 

V.            Protected Health Information Access, Amendment and Disclosure
Accounting.

 

A.            Access.  Business Associate will promptly upon Recipient’s or its
Subsidiary’s or Affiliate’s request make available to Recipient, its Subsidiary,
its Affiliate, or, at Recipient’s or such Subsidiary’s or Affiliate’s direction,
to the individual (or the individual’s personal representative) for inspection
and obtaining copies any PHI about the individual which Business Associate
created for or received from Recipient or its Subsidiary or Affiliate and that
is in Business Associate’s custody or control, so that Recipient or its
Subsidiary or Affiliate may meet its access obligations under 45 Code of Federal
Regulations § 164.524.

 

B.            Amendment.  Upon Recipient’s or its Subsidiary’s or Affiliate’s
request Business Associate will promptly amend or permit Recipient or its
Subsidiary or Affiliate access to amend any portion of the PHI which Business
Associate created for or received from Recipient or its Subsidiary or Affiliate,
and incorporate any amendments to such PHI, so that Recipient or its Subsidiary
or Affiliate may meet its amendment obligations under 45 Code of Federal
Regulations § 164.526.

 

C.            Disclosure Accounting.  So that Recipient or its Subsidiaries or
Affiliates may meet their disclosure accounting obligations under 45 Code of
Federal Regulations § 164.528:

 

1.     Disclosure Tracking.  Business Associate will record for each disclosure,
not excepted from disclosure accounting under Section V.C.2 below, that Business
Associate makes to Recipient or its Subsidiaries of PHI that Business Associate
creates for or receives from Recipient or its Subsidiaries, (i) the disclosure
date, (ii) the name and member or other policy identification number of the
person about whom the disclosure is made, (iii) the name and (if known) address
of the person or entity to whom Business Associate made the disclosure, (iv) a
brief description of the PHI disclosed, and (v) a brief statement of the purpose
of the disclosure (items i-v, collectively, the “disclosure information”).  For
repetitive disclosures Business Associate makes to the same person or entity
(including Recipient or its Subsidiaries) for a single purpose, Business
Associate may provide a) the disclosure information for the first of these
repetitive disclosures, (b) the frequency, periodicity or number of these
repetitive disclosures and (c) the date of the last of these repetitive
disclosures.  Business Associate will make this disclosure information available
to Recipient or its Subsidiaries promptly upon Recipient’s or its Subsidiaries’
request.

 

2.     Exceptions from Disclosure Tracking.  Business Associate need not record
disclosure information or otherwise account for disclosures of PHI that this
Addendum or

 

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Recipient or the relevant Subsidiary or Affiliate in writing permits or requires
(i) for the purpose of Recipient’s or its Subsidiaries’ treatment activities,
payment activities, or health care operations, (ii) to the individual who is the
subject of the PHI disclosed or to that individual’s personal representative;
(iii) to persons involved in that individual’s health care or payment for health
care; (iv) for notification for disaster relief purposes, (v) for national
security or intelligence purposes, (vi) to law enforcement officials or
correctional institutions regarding inmates; or (vii) pursuant to an
authorization; (viii) for disclosures of certain PHI made as part of a Limited
Data Set; (ix) for certain incidental disclosures that may occur where
reasonable safeguards have been implemented; and (x) for disclosures prior to
April 14, 2003.

 

3.     Disclosure Tracking Time Periods.  Business Associate must have available
for Recipient and its Subsidiaries the disclosure information required by this
section for the 6 years preceding Recipient’s or its Subsidiaries’ request for
the disclosure information (except Business Associate need have no disclosure
information for disclosures occurring before April 14, 2003).

 

VI.           Additional Business Associate Provisions

 

A.            Reporting of Breach of Privacy Obligations.  Business Associate
will provide written notice to whichever of the Recipient or its Subsidiary or
Affiliate for which the relevant PHI was created or from which the relevant PHI
was received of any use or disclosure of PHI that is neither permitted by this
Addendum nor given prior written approval by Recipient or the relevant
Subsidiary or Affiliate promptly after Business Associate learns of such
non-permitted use or disclosure.  Business Associate’s report will at least:

 

(i)            Identify the nature of the non-permitted use or disclosure;

 

(ii)           Identify the PHI used or disclosed;

 

(iii)          Identify who made the non-permitted use or received the
non-permitted disclosure;

 

(iv)          Identify what corrective action Business Associate took or will
take to prevent further non-permitted uses or disclosures;

 

(v)           Identify what Business Associate did or will do to mitigate any
deleterious effect of the non-permitted use or disclosure; and

 

(vi)          Provide such other information, including a written report, as
Recipient or the relevant Subsidiary or Affiliate may reasonably request.

 

B.            Amendment.  Upon the effective date of any final regulation or
amendment to final regulations promulgated by the U.S. Department of Health and
Human Services with respect to PHI, including, but not limited to the HIPAA
privacy and security regulations, this Addendum and the Agreement will
automatically be amended so that the obligations they impose on Business
Associate remain in compliance with these regulations.

 

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In addition, to the extent that new state or federal law requires changes to
Business Associate’s obligations under this Addendum, this Addendum shall
automatically be amended to include such additional obligations, upon notice by
Recipient or its Subsidiaries to Business Associate of such obligations. 
Business Associate’s continued performance of services under the Agreement shall
be deemed acceptance of these additional obligations.

 

C.            Audit and Review of Policies and Procedures.  Business Associate
agrees to provide, upon Recipient request, access to and copies of any policies
and procedures developed or utilized by Business Associate regarding the
protection of PHI.  Business Associate agrees to provide, upon Recipient’s
request, access to Business Associate’s internal practices, books, and records,
as they relate to Business Associate’s services, duties and obligations set
forth in this Addendum and the Agreement(s) under which Business Associate
provides services and / or products to or on behalf of Recipient or its
Subsidiaries, for purposes of Recipient’s or its Subsidiaries’ review of such
internal practices, books, and records.

 

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