Document:

Exhibit
10.27

 

 

 

BUSINESS SERVICES
AGREEMENT

 

dated
                        ,
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.

 

 

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

  	
   

  
				

 

 

	
  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

  	
   

  

 

ii

 

This Business Services
Agreement, dated
              ,
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
          , 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.

 

 

1

 

“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)

  

 

2

 

 

	
  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

 

 

3

 

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

 

4

 

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.

 

5

 

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.

 

6

 

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;

 

7

 

(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

 

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

 

(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

 

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

 

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

 

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

 

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:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  UNION FIDELITY LIFE
  INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

14

 

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.

 

 

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

 

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

 

3

 

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

 

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

 

 

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

 

2

 

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”).

 

 

(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.

 

2

 

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

 

3

 

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.

 

4

 

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.

 

 

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

 

2

 

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.

 

3

 

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

 

4

 

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.

 

5

 

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.

 

6Exhibit
10.28

 

 

DERIVATIVES MANAGEMENT SERVICES AGREEMENT

 

 

AMONG

 

UNION FIDELITY LIFE INSURANCE COMPANY

 

AND

 

GE ASSET MANAGEMENT INCORPORATED

 

AND

 

GENERAL ELECTRIC CAPITAL CORPORATION

 

 

 

 

DATED AS OF  APRIL 15,
2004

 

 

THIS
DERIVATIVES MANAGEMENT SERVICES AGREEMENT (the “Agreement”) is made and entered into as of the
15th day of April, 2004 (the “Effective Date”), by and among UNION FIDELITY
LIFE INSURANCE COMPANY, an insurance company domiciled in the State of Illinois
(“UFLIC”), GE ASSET MANAGEMENT INCORPORATED, a Delaware corporation (“GEAM”)
and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (“GECC”).

 

RECITALS

 

                WHEREAS, UFLIC,
GEAM and GECC are all subsidiaries of General Electric Company; and

 

                WHEREAS, the
UFLIC, from time to time, desires to hedge certain risks, including but not
limited to interest rate risk, associated with its assets through the use of
instruments commonly referred to as derivatives; and

 

                WHEREAS,
resolutions adopted by the GECC Board and related policy statements require
that GECC’s Treasury Operation (“GECC Treasury”) executes, manages and
administers all derivative transactions on behalf of GECC and its subsidiaries;
and

 

                WHEREAS, effective
May 1, 2002, UFLIC entered into an Investment Management and Services Agreement
with GEAM; and

 

                WHEREAS, GECC
Treasury may from time to time, at the request of GEAM, appoint certain
individuals at GEAM as representatives of GECC Treasury with limited authority
to execute, manage and administer certain derivative transactions on behalf of
UFLIC; and

 

                WHEREAS, UFLIC
will enter into ISDA Master Agreements together with related schedules and
confirmations (the “Contracts”) with various unaffiliated counterparties
(individually, a “Counterparty” and collectively, the “Counterparties”); and

 

                WHEREAS, UFLIC,
GECC and GEAM desire to enter into this Agreement to set forth the services
that each of GECC and GEAM will provide to UFLIC in connection with the
Contracts;

 

NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, UFLIC, GECC and GEAM hereby agree as follows:

 

 

ARTICLE
I

DEFINITIONS
AND USAGE

 

1.1                               Definitions.  The
following capitalized terms, as used in this Agreement, have the following
meanings:

 

“Affiliate” of a Person
means a Person who, directly or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, such Person.

 

“Applicable Law” or
“Applicable Laws” means any domestic or foreign federal, state or local
statute, law, ordinance or code, including the Illinois insurance code, or any
rules, regulations, administrative interpretations or orders issued by any
Governmental Authority, including any Insurance Authority, pursuant to any of
the foregoing, and any order, writ, injunction, directive, judgment or decree
of a court of competent jurisdiction applicable to the parties hereto.

 

“Board” means the Board
of Directors of UFLIC as the same may be elected from time to time by the
shareholders of UFLIC.

 

“Contracts” shall have
the meaning set forth in the recitals to this Agreement.

 

“Effective Date” shall
have the meaning set forth in the introductory paragraph.

 

“GAAP” means generally
accepted accounting principles in effect, from time to time, in the United
States.

 

“Governmental Authority”
means any Insurance Authority or any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States or
any federal, national, state, municipal, county, city or other political
subdivision.

 

“Insurance Authority”
means the department, bureau, commission or other agency responsible for
overseeing insurance matters within any state that UFLIC is authorized to do
business (as applicable to UFLIC).

 

“Investment Committee”
means a committee designated by UFLIC’s Board to oversee UFLIC’s investment
activities, including the execution and management of derivative transactions.

 

“Investment Guidelines”
shall mean the resolutions pertaining to derivatives transactions adopted by
the Board of UFLIC.

 

 “Person” means an individual, corporation,
partnership, limited liability company, association, trust or any other entity
or organization, including governmental or political subdivision or an agency
or instrumentality thereof.

 

2

 

“Records” shall have the
meaning set forth in Section 2.5.

 

“Representatives” means,
as applicable, UFLIC’s directors, officers, employees, accountants and legal
and financial advisors.

 

“Representer” shall have
the meaning set forth in Section 6.2.

 

“SAP” means statutory
accounting procedures and principles prescribed or permitted by Applicable Law.

 

1.2                               Headings; Rules of Construction. 
The headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.  Except as otherwise expressly provided in
this Agreement, the following rules of interpretation apply to this Agreement:
(i) the singular includes the plural and the plural includes the singular; (ii)
“or” and “any” are not exclusive and “include” and “including” are not
limiting; (iii) a reference to any agreement or other contract includes
permitted supplements and amendments; (iv) a reference to a law includes any
amendment or modification to such law and any rules or regulations issued
thereunder; (v) a reference to a person includes its successors and permitted
assigns; and (vi) a reference in this Agreement to an article, section, annex,
exhibit or schedule is to the article, section, annex, exhibit or schedule of
this Agreement.

 

ARTICLE
II

SERVICES

 

2.1                               Execution and Management. 
Subject to the provisions of this Section 2.1, GECC Treasury will
establish and confirm the terms of derivative transactions from time to time in
the name of UFLIC and shall execute and deliver or otherwise enter into from
time to time one or more derivatives confirmations or agreements evidencing
such derivative transactions on behalf of and in the name of UFLIC as requested
by UFLIC.  In its performance of the
foregoing obligations, GECC Treasury may appoint, from time to time at the
request of GEAM, certain employees of GEAM as representatives of GECC Treasury
with authority to execute, manage and administer certain derivative
transactions on behalf of UFLIC in accordance with the terms of such
appointment; provided, however, that such appointment shall be in
writing and any action taken by any such GEAM employee shall be in accordance
with GECC’s policies with respect to derivatives transactions as in effect from
time to time.

 

2.2                               Credit Support.  With respect
to each Contract, GECC or one of its affiliates may provide a guaranty in favor
of the Counterparty to such Contract.

 

2.3                               Administrative Services. 
With respect to the Contracts, GECC will provide certain administrative
services, including without limitation certain legal services and paying agent
services, on behalf of UFLIC, as set forth in the Administrative Services
Agreement 

 

3

 

                                                (in the form attached as Exhibit A
hereto), dated as of the date hereof, between GECC and UFLIC.  In its performance of the foregoing
obligations, GECC may appoint, from time to time, certain employees of GEAM as
representatives of GECC Treasury with authority to execute, manage and
administer certain derivative transactions on behalf of UFLIC in accordance
with the terms of such appointment; provided, however, that any such
appointment shall be in writing and any action taken by any such GEAM employee
shall be in accordance with GECC’s policies with respect to derivatives
transactions as in effect from time to time.

 

2.4                               Covenants of GECC and GEAM.

 

(a)                                  Each of GECC and GEAM shall discharge its
duties with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person, acting in a like capacity and familiar
with such matters should use in the conduct of an enterprise of a like
character and with like aims.  Further,
each of GECC and GEAM shall use the same skill and care in the management of
UFLIC’s derivative transactions and in its other duties hereunder as it uses in
the administration of other similar matters for which it has comparable
responsibility.

 

(b)                                 In the performance of its duties and
obligations to UFLIC under this Agreement, each of GECC and GEAM shall act in
conformity with (i) the Articles of Incorporation and Bylaws of UFLIC, (ii)
UFLIC’s Investment Guidelines or other written instructions of UFLIC’s Board,
(iii) UFLIC’s Investment Committee or Representatives of UFLIC, as applicable,
(iv) GECC’s policies, including with respect to derivatives transactions, as in
effect from time to time, and (v) all Applicable Laws.

 

2.5                               Recordkeeping and Reports; Review and Inspection.

 

(a)                                  GECC and GEAM shall, unless otherwise
agreed with UFLIC, maintain all records, memoranda, instructions or
authorizations (collectively, “Records”) relating to the execution, management
and administration of derivative transactions on behalf of UFLIC as required by
Applicable Laws, GAAP or SAP.  Such
Records will be the property of UFLIC. 
On a timely basis, GECC and GEAM shall make available to UFLIC, at its
administrative offices or such other location as may be designated by UFLIC,
copies or originals of such Records upon reasonable request and, as necessary,
to comply with Applicable Laws.

 

(b)                                 All Records, both internal and external
with third parties, to the extent within the control of GECC and GEAM, will
clearly specify the ownership interest of UFLIC with respect to the relevant
derivative transactions.

 

(c)                                  Records concerning derivative
transactions executed or managed on behalf of UFLIC that are not maintained
physically on UFLIC’s premises or UFLIC’s care, custody and control shall be
subject to review and audit at any time by UFLIC, its 

 

4

 

                                                Representatives, any Insurance Authority
and any other Governmental Authority, or any other entity designated by UFLIC,
and GECC and GEAM shall cooperate with and provide reasonable assistance to any
such person, including any auditor appointed by UFLIC to conduct an audit of or
for UFLIC.  Such Records shall be
maintained for the time periods and in a format required by Applicable
Law.  GECC and GEAM shall notify UFLIC
prior to destruction of UFLIC’s Records (in order that UFLIC may request
transfer of such Records to UFLIC as an alternative to destruction); provided
that GECC and GEAM may not, in any event, destroy such Records prior to
expiration of all applicable statutes of limitation.

 

(d)                                 GECC and GEAM shall provide to UFLIC such
other documents and information pertaining to this Agreement and the derivative
transactions executed or managed on behalf of UFLIC at such times as UFLIC may
reasonably request including, but not limited to, information required to
prepare reports to any Insurance Authority or any other entity designated by
UFLIC or as may be required to comply with GAAP, SAP or Applicable Law.

 

(e)                                  GECC and GEAM will fully cooperate with
UFLIC with respect to unsettled or unreconciled transactions and daily
transmission of trading activity.

 

2.6                               Information Furnished to GECC or GEAM. 
UFLIC shall furnish to GECC or GEAM in a timely manner any information
that GECC or GEAM may reasonably request with respect to the services performed
under this Agreement for UFLIC.  In determining
the requirements of Applicable Laws with respect to UFLIC, GECC and GEAM may
rely on an interpretation of law by legal counsel to UFLIC.  In determining the requirements of
applicable accounting rules with respect to UFLIC, GECC and GEAM may rely on an
interpretation of such rules by accountants for UFLIC.

 

ARTICLE III

TERM AND TERMINATION

 

3.1                               This Agreement shall continue in effect for an initial
term beginning on the Effective Date and ending December 31, 2004.  Unless earlier terminated, this Agreement
shall automatically renew on January 1, 2005 and on each January 1 thereafter
for successive periods of one (1) year. 
This Agreement may be terminated (i) at any time during the initial term
or any renewal term by GECC or UFLIC without payment of any penalty upon sixty
(60) days prior written notice to the other parties (which notice shall specify
the effective date of termination), and (ii) immediately for cause by UFLIC
(cause being understood as any material breach, action or omission by GECC or
GEAM that, in the reasonable belief of UFLIC, is inconsistent with the terms of
this Agreement).  This Agreement also
shall automatically terminate in the event of its unauthorized assignment by
any party or if any party ceases to be a majority-owned direct or indirect
subsidiary of General Electric Company. 
Termination in any manner shall not affect the rights of any party,
including the status of any guarantees issued pursuant to Section 2.2 of this
Agreement that accrued prior to termination.

 

5

 

3.2                               Within sixty (60) days of the termination
of this Agreement, GECC and GEAM shall transfer all Records of UFLIC to UFLIC
or its designee.  All reasonable costs
to transfer UFLIC’s Records shall be paid by UFLIC.

 

ARTICLE
IV

COMPENSATION

 

Each of GEAM and
GECC agree that if services are performed under this agreement, the parties
will determine appropriate compensation at the time the services are rendered,
provided, that such compensation shall be fair and reasonable.  Such agreement, however, shall not extend to
reimbursement of losses, damages and other expenses contemplated under Section
7.2 and for reimbursement of all reasonable out-of pocket costs and expenses incurred
on behalf of UFLIC.

 

ARTICLE
V

CONFIDENTIALITY

 

Subject to the duty of
GECC, GEAM or UFLIC to comply with Applicable Laws, each party hereto shall
treat as confidential all information with respect to any other party received
pursuant to this Agreement.  No party
shall use or disclose another party’s confidential information except as
contemplated by this Agreement or except as required by Applicable Law.

 

ARTICLE
VI

REPRESENTATIONS
AND WARRANTIES

 

6.1          By UFLIC. 
UFLIC represents and warrants that:

 

(a)                                  It is an insurance company duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has the power and authority (including approval from the
relevant Insurance Authority, if required) to execute, deliver and perform this
Agreement; and

 

(b)                                 This Agreement is the valid and binding
obligation of UFLIC enforceable against it in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting creditors’ rights generally or by the principles
governing the availability of equitable remedies.

 

6.2                               By GECC and GEAM.  Each of GECC
and GEAM (each a “Representer”) represents and warrants with respect only to
itself that:

 

(a)                                  It is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, has the power
and authority to execute, deliver and perform this Agreement;

 

6

 

(b)                                 This Agreement is the valid and binding
obligation of the Representer enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors’ rights generally or by
the principles governing the availability of equitable remedies; and

 

(c)                                  Neither the execution and delivery nor
the performance of this Agreement by the Representer will violate any law,
statute, order, rule or regulation or judgment, order or decree by any federal,
state, local or foreign court or governmental authority, domestic or foreign,
to which the Representer is subject nor will the same constitute a breach of,
or default under, provisions of any agreement or contract to which it is a
party or by which it is bound.

 

ARTICLE VII

MISCELLANEOUS

 

7.1                               Limitation of Liability. 
In furnishing UFLIC with services as provided herein, none of GECC or
GEAM nor any officer, director or agent thereof shall be held liable to UFLIC,
its creditors or the holders of its securities for good faith errors of
judgment or for anything except willful misfeasance, bad faith or negligence in
the performance of its duties, or reckless disregard of its obligations and
duties under the terms of this Agreement. 
It is further understood and agreed that GECC and GEAM may rely upon
information furnished to it by UFLIC that GECC or GEAM (as applicable)
reasonably believes to be accurate and reliable.  Certain federal laws, including federal securities laws, impose
liabilities under certain circumstances on persons who act in good faith and
therefore nothing contained herein shall in any way constitute a waiver or
limitation of any rights that UFLIC may have under any such federal laws.

 

7.2                               Indemnification.

 

(a)                                Notwithstanding any limitation of
liability contained in Section 7.1, GECC and GEAM shall indemnify and hold
UFLIC harmless from and against any losses, damages, expenses (including
reasonable attorneys’ fees), liabilities, penalties, demands and claims of any
nature whatsoever with respect to or arising out of the breach or violation by
GECC or GEAM of any agreement, covenant, representation or warranty made by
GECC or GEAM herein.

 

(b)                                 UFLIC shall indemnify and hold GECC or
GEAM harmless from and against any losses, damages, expenses (including
reasonable attorneys’ fees), liabilities, penalties, demands and claims of any
nature whatsoever with respect to or arising out UFLIC’s breach or violation of
any agreement, covenant, representation or warranty made by UFLIC herein.

 

7.3                               Assignment.  No
assignment (by operation of law or otherwise) of this Agreement, in whole or in
part, nor any of the rights, interests or obligations under this Agreement by 

 

7

 

                                                any party shall be effective without the
prior written consent of the other parties and any necessary approvals from the
relevant Insurance Authority.  Subject
to the provisions of this Section 7.3, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
successors and permitted assigns.

 

7.4                               Independent Contractor. 
GEAM and GECC shall be deemed to be independent contractors and, except
as expressly provided or authorized in this Agreement, shall have no authority
to act for or represent UFLIC.  UFLIC
shall always retain the ultimate authority to make decisions regarding the
execution or management of derivative transactions on its own behalf.

 

7.5                               Right to Contract with Third Parties. 
Nothing herein shall be deemed to grant to GEAM or GECC an exclusive
right to provide the services described herein to UFLIC, and UFLIC retains the
right to contract with any third party, affiliated or unaffiliated, for the
performance of services or for the use of facilities as are available to or
have been requested by UFLIC pursuant to this Agreement; provided, however,
GECC Treasury shall execute all derivatives transactions of any subsidiary with
respect to which GECC has direct or indirect voting control in accordance with
the GECC Derivatives Policy.

 

7.6                               Governing Law.  This
Agreement shall be governed by the laws of the State of Illinois, without
giving effect to its conflict of laws principles.

 

7.7                               Notices.  Any notice
under this Agreement shall be given in writing, addressed, and delivered by
hand or facsimile, or mailed postpaid by U.S. Mail or overnight courier
service, to the party to this Agreement entitled to receive such notice, at
such party’s principal place of business as set out here:

 

If to GECC:

 

Associate General Counsel

General Electric Capital Corporation

201 High Ridge Road

Stamford, Connecticut 06927-9400

Facsimile: 
(203) 357-3490

 

8

 

If to GEAM:

 

General Counsel

GE Asset Management Incorporated

3003 Summer Street, P.O. Box 7900

Stamford, Connecticut 06904-7900

Facsimile: 
(203) 326-4177

 

If to UFLIC:

 

General Counsel

Union Fidelity Life Insurance Company

200 North Martingale Road

Schaumburg, IL 60173

Facsimile: 
(847) 605-3044

 

or to such other address as each party may designate
in writing mailed to the other parties. 
Unless otherwise permitted by the terms hereof, whenever any notice is
required to be given hereunder, such notice shall be deemed given and such
requirement satisfied only when such notice is delivered by hand, or, if
delivered by facsimile, overnight courier or mail, when received.

 

7.8                               Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

7.9                               Amendments.  No term or
provision of this Agreement may be modified, amended, waived, discharged or
terminated except by an agreement in writing, executed by each of the parties
hereto; provided that any material amendment shall be subject to the
approval, if required, of the relevant Insurance Authority.

 

7.10                        Entire Agreement.  This
Agreement supersedes any and all oral or written agreements or understandings
heretofore made, and contains the entire agreement of the parties, with respect
to the subject matter hereof.

 

7.11                        Counterparts.  This
Agreement may be executed in one or more counterparts, and such counterparts
together shall constitute one and the same agreement.

 

 

[THE REST OF THIS PAGE IS
LEFT BLANK INTENTIONALLY]

 

9

 

                IN WITNESS
WHEREOF, the parties hereto have caused this instrument to be duly executed by
their respective officers thereunto duly authorized as of the day and year
first above written.

 

 

	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James a.
  Parke

  
	
   

  	
   

  	
  Name:

  	
  James A. Parke

  
	
   

  	
   

  	
  Title:

  	
  Vice Chairman and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GE ASSET MANAGEMENT INCORPORATED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alan M.
  Lewis

  
	
   

  	
   

  	
  Name:

  	
  Alan M. Lewis

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - General Counsel and
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  UNION FIDELITY LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn Joppa

  
	
   

  	
   

  	
  Name:

  	
  Glenn Joppa

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President and Secretary

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