Document:

Exhibit
10.54

COINSURANCE AGREEMENT

between

FIRST COLONY LIFE INSURANCE COMPANY

and

UNION FIDELITY LIFE INSURANCE COMPANY

Dated as of April 15, 2004

 

TABLE OF CONTENTS

	
   

  	
   

  
	
  ARTICLE
  I

  	
  DEFINITIONS

  
	
  ARTICLE II

  	
  COVERAGE

  
	
  ARTICLE III

  	
  ADMINISTRATION; GENERAL PROVISIONS

  
	
  ARTICLE IV

  	
  CLAIMS SETTLEMENT ACCOUNT; CLAIMS

  
	
  ARTICLE
  V

  	
  REINSURANCE
  ASSET TRANSFER; CEDING COMMISSION

  
	
  ARTICLE VI

  	
  EXPENSE ALLOWANCES

  
	
  ARTICLE VII

  	
  ACCOUNTING AND SETTLEMENT

  
	
  ARTICLE VIII

  	
  DURATION AND TERMINATION

  
	
  ARTICLE IX

  	
  INSOLVENCY

  
	
  ARTICLE
  X

  	
  CREDIT
  FOR REINSURANCE

  
	
  ARTICLE XI

  	
  REINSURANCE SECURITY

  
	
  ARTICLE XII

  	
  DEFERRED ACQUISITION COSTS

  
	
  ARTICLE XIII

  	
  DISPUTE RESOLUTION

  
	
  ARTICLE XIV

  	
  MISCELLANEOUS PROVISIONS

  

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
  —

  	
  POLICY FORMS

  
	
  SCHEDULE B

  	
  —

  	
  FORM OF ADMINISTRATIVE
  SERVICES AGREEMENT

  
	
  SCHEDULE C

  	
  —

  	
  CEDING COMMISSION

  
	
  SCHEDULE D

  	
  —

  	
  ASSETS

  
	
  SCHEDULE E

  	
  —

  	
  EXPENSE ALLOWANCES

  
	
  SCHEDULE F - PART I

  	
  —

  	
  INITIAL REPORT

  
	
  SCHEDULE F - PART II

  	
  —

  	
  QUARTERLY REPORT

  
	
  SCHEDULE F - PART III

  	
  —

  	
  ANNUAL REPORT

  
	
  SCHEDULE G

  	
  —

  	
  FORM OF TRUST AGREEMENT

  
	
  SCHEDULE H

  	
  —

  	
  ELIGIBLE SECURITIES

  

 

 

i

 

COINSURANCE
AGREEMENT

This Coinsurance Agreement,
dated as of April 15, 2004 (this “Agreement”), is made and entered into by and
between First Colony Life Insurance Company, an insurance company organized
under the laws of the Commonwealth of Virginia (the “Company”), and Union
Fidelity Life Insurance Company, an insurance company organized under the laws
of the State of Illinois (the “Reinsurer”). 
Defined terms used herein are defined below.

The Company and the
Reinsurer mutually agree to reinsure the risks described in this Agreement
under the terms and conditions stated herein. 
This Agreement is an indemnity coinsurance agreement solely between the
Company and the Reinsurer, and the performance of the obligations of each party
under this Agreement shall be rendered solely to the other party.  In no instance shall anyone other than the
Company or the Reinsurer have any rights under this Agreement.  The Company shall be and shall remain the
only party hereunder that is liable to any insured, contract holder,
policyholder, claimant or beneficiary under any insurance policy or contract
reinsured hereunder.

This Agreement is entered
into in connection with an intercompany reorganization among the Company, the
Reinsurer and certain of their Affiliates.

ARTICLE I

DEFINITIONS

 

1.1.          Definitions. 
As used in this Agreement, the following terms shall have the following
meanings (definitions are applicable to both the singular and the plural forms
of each term defined in this Article):

 

“Accounting Period”
means calendar quarter, except that the last Accounting Period shall be the
period commencing with the first day of the calendar quarter in which the
Termination Date falls and ending with the Termination Date.

“Affiliate” means any
other Person that directly or indirectly controls, is controlled by, or is
under common control with, the first Person. 
“Control” (including the terms, “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise.

“Agreement” shall
have the meaning specified in the first paragraph of this Agreement.

“Annual Report” shall
have the meaning specified in Section 7.4.

“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 of such Person’s
subsidiaries, 

 

properties,
assets, or to such Person’s officers, directors, managing directors, employees
or agents in their capacity as such.

“Assets” shall have
the meaning specified in Section 5.3(a).

“Assignment Letter
Agreement” means the letter agreement dated the date hereof among General
Electric Capital Corporation, a Delaware corporation, the Reinsurer, the
Company and certain affiliates of the Company relating to the assignment by
General Electric Capital Corporation of the Capital Maintenance Agreement.

“Benefits” shall have
the meaning specified in Section 2.3(a).

“Business Day” means
any day other than a Saturday, Sunday or other day on which commercial banks in
the States of Illinois or Virginia are required or authorized by law to be
closed.

“Capital Maintenance
Agreement” means the Capital Maintenance Agreement between General Electric
Capital Corporation, a Delaware corporation, and the Reinsurer.

“Ceding Commission”
shall have the meaning specified in Section 5.2.

“Claims Settlement
Account” shall have the meaning specified in Section 4.1(a).

“Closing Date” means
April 15, 2004.

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

“Company Account”
shall have the meaning specified in Section 11.1(e).

“CPR” shall have the
meaning specified in Section 13.3.

“CPR Arbitration Rules”
shall have the meaning specified in Section 13.4(a).

“Dispute” shall have
the meaning specified in Section 13.1(a).

“Eligible Securities”
shall have the meaning specified in Section 11.1(c).

“Expense Allowance”
shall have the meaning specified in Section 6.1.

“Extra Contractual
Liabilities” means all liabilities for damages (including compensatory,
consequential, exemplary, punitive, bad faith or similar or other damages)
which relate to the marketing, sale, underwriting, issuance, delivery,
cancellation or administration of the Reinsured Contracts, including liability
arising out of or relating to any alleged or actual acts, errors or omissions
by the Company or its agents, whether intentional or otherwise, with respect to
any of the Reinsured Contracts, including (A) any alleged or actual reckless
conduct or bad faith in connection with the handling of any claim arising out
of or under Reinsured Contracts, or (B) the marketing, sale, underwriting,
issuance, delivery, cancellation or administration of any of the Reinsured
Contracts.

 

2

 

“Force Majeure” shall
have the meaning specified in Section 3.7(b)(iii).

“Funding Requirement”
shall have the meaning specified in Section 11.1(e).

“GAAP” means U.S.
generally accepted accounting principles consistently applied.

“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.

“Inception Date”
shall have the meaning specified in Section 2.1.

“Initial Notice”
shall have the meaning specified in Section 13.2.

“Initial Reinsurance
Premium” shall have the meaning specified in Section 5.1.

“Initial Report”
shall have the meaning specified in Section 7.1.

“Insolvency Fund”
means any guarantee fund, insolvency fund, plan, pool, association, fund or
other arrangement, however denominated, established or governed, which provides
for any assessment of or payment or assumption by the Company of part or all of
any claim, debt, charge, fee or other obligation of an insurer or reinsurer, or
its successors or assigns, which has been declared by any competent authority
to be insolvent, or which is otherwise deemed unable to meet any claim, debt,
charge, fee or other obligation in whole or in part.

“Minimum Claims
Settlement Amount” shall have the meaning specified in Section 4.1(b).

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

“Quarterly Report”
shall have the meaning specified in Section 7.2.

“Quarterly Settlement”
shall have the meaning specified in Section 5.3(a).

“RBC Reporting Letter
Agreement” means the letter agreement dated the date hereof among the
Company, the Reinsurer and certain affiliates of the Company relating to the
Reinsurer’s requirement to provide periodic certifications and reports regarding
the Reinsurer’s risk based capital ratio.

“Reinsured Contracts”
means the structured settlements immediate annuity contracts issued by the
Company and recorded in the Company’s valuation system on or prior to December
3, 2003 or reinsured by the Company under reinsurance agreements in effect
prior to January 1, 2004, and, in each case, written on the policy forms
described in Schedule A.

“Reinsured Risks”
shall have the meaning specified in Section 2.1.

 

3

 

“Response” shall have
the meaning specified in Section 13.2.

“SAP” means statutory
accounting practices prescribed or permitted by the Insurance Department of the
Commonwealth of Virginia.

“Tax DAC” means
specified policy acquisition expenses capitalized and amortized under section
848 of the Code.

“Termination Date”
means the effective date of any termination of this Agreement as provided in
Article VIII.

“Termination Letter
Agreement” means the letter agreement dated the date hereof among the
Company, the Reinsurer and certain affiliates of the Company relating to the
rescission of this Agreement upon the failure of certain events to occur after
the date hereof.

“Total SAP Ceded Reserves”
means, as of any given date, the gross policy reserves of the Company
calculated in accordance with SAP with respect to the Reinsured Risks.

“Total GAAP Ceded
Reserves” means, as of any given date, the gross policy reserves of the
Company calculated in accordance with GAAP with respect to the Reinsured Risks.

“Trust Account” shall
have the meaning set forth in Section 11.1(a).

“Trust Agreement”
shall have the meaning set forth in Section 11.1(a).

“Trustee” shall have
the meaning set forth in Section 11.1(a).

ARTICLE II

 

COVERAGE

 

2.1.          Coverage. 
Upon the terms and subject to the conditions and other provisions of
this Agreement, as of 12:01 a.m. Eastern Time on January 1, 2004 (the
“Inception Date”), the Company hereby cedes to the Reinsurer, and the Reinsurer
hereby agrees to indemnify the Company for, one hundred percent (100%) of the
liability incurred by the Company for Benefits on or after the Inception Date
(the “Reinsured Risks”).

2.2.          Conditions. 
(a) If the Company’s liability under any of the Reinsured Contracts is
changed because of changes made on or after the Inception Date in the terms and
conditions of the Reinsured Contracts (including to any contract riders or
endorsements thereto) that are required due to changes in Applicable Law, the
Reinsurer will share in the change proportionately to the coinsurance share
hereunder and the Company and the Reinsurer will make all appropriate
adjustments to amounts due each other under this Agreement.

(b)   Except as otherwise set forth in paragraph
(a) above, no changes, amendments or modifications made on or after the Inception
Date in the terms and conditions of the 

 

4

 

 

Reinsured
Contracts which adversely affect the liability of the Reinsurer hereunder shall
be covered hereunder without the prior written approval of such changes,
amendments or modifications by the Reinsurer, which approval shall not be
unreasonably withheld or delayed.  In
the event that any such changes, amendments or modifications are made in any
Reinsured Contract without the prior written approval of the Reinsurer, this
Agreement will cover liability incurred by the Company for Benefits as if the
non-approved changes, amendments or modifications had not been made.

2.3.          Benefits.  (a) 
Subject to the provisions of Sections 2.2, 2.3(b) and (c) and the terms
and conditions of this Agreement, “Benefits” shall mean the actual benefits
payable by the Company under the Reinsured Contracts.

(b)   Any Extra Contractual Liabilities resulting
from actions of the Company or its agents or reinsured by the Company under the
Reinsured Contracts shall be treated as a Benefit payable for the purposes of
this Agreement to the extent permitted by state law, except to the extent that
any such Extra Contractual Liabilities are attributable to the conduct of the
Company in the administration of the Reinsured Contracts on or after the
Inception Date, other than actions taken by the Company at the written request
or direction of the Reinsurer.

(c)   This Agreement excludes all liability arising
by contract, operation of law, or otherwise from the Company’s participation or
membership, whether voluntary or involuntary, in any Insolvency Fund.

2.4.          Territory. 
The territorial limits of this Agreement shall be identical with those
of the Reinsured Contracts.

2.5.          Ceded Reinsurance. 
Subsequent to the Inception Date, the Company will not enter into any
reinsurance arrangements with respect to the Reinsured Contracts without the
prior written consent of the Reinsurer, in its sole discretion.

ARTICLE III

 

ADMINISTRATION;
GENERAL PROVISIONS

 

3.1.          Contract Administration.  (a)  Subject to Section
3.7, the Company shall provide policyholder and claims servicing with respect
to the Reinsured Contracts in accordance with the terms hereof.  All Benefits paid by the Company shall be
binding upon the Reinsurer; provided, however, that such Benefits
are within the terms, conditions and limitations of the Reinsured
Contracts.  The Company shall provide
policyholder and claims servicing with respect to the Reinsured Contracts
(including the administration of claims for Benefits thereunder) in good faith
and with the care, skill, prudence and diligence of a person experienced in
administering structured settlement business. 
The Company shall provide policyholder and claims servicing with respect
to the Reinsured Contracts, (i) in accordance with the terms of the
Reinsured Contracts, (ii) in accordance with the applicable terms of this
Agreement, (iii) in compliance with Applicable Law and, subject to the
foregoing, (iv) in the same manner as it conducts its own business not subject
to this Agreement and (v) in accordance with the Company’s administrative
performance standards in effect on the date hereof, with such revisions 

 

5

 

 

to such standards as are no
less favorable to the Reinsurer than such standards.  Notwithstanding the foregoing, the parties may, from time to
time, mutually develop specific and/or different standards for providing such
services with respect to the Reinsured Contracts.

(b)   The Company may subcontract for the
performance of any policyholder or claims servicing service or services with
respect to the Reinsured Contracts to (i) an Affiliate or (ii) any other Person
with the prior written consent of the Reinsurer, such consent not to be
unreasonably withheld; provided, that the Company also subcontracts for
such service or services for its own structured settlement annuities business
not subject to this Agreement to such subcontractor; and provided, further,
that no such subcontracting shall relieve the Company from any of its
obligations or liabilities hereunder, and the Company shall remain responsible
for all obligations or liabilities of such subcontractor with regards to the
providing of such service or services as if provided by the Company.

3.2.          Claims Settlements. 
The Company agrees that it will provide prompt notice to the Reinsurer
of its intention to contest, compromise or litigate a claim with respect to a
Reinsured Contract, along with copies of all pleadings and reports of
investigation with respect thereto.  The
Reinsurer shall have the right, at its own expense, to participate jointly with
the Company in the investigation, adjustment or defense of such claims.  In addition, in the event that litigation
arises against the Company in connection with a claim which seeks damages in
excess of $1 million or other remedies deemed material to the Reinsurer, the
Reinsurer may, upon written notice to the Company, assume the defense thereof
with counsel selected by the Reinsurer and reasonably satisfactory to the
Company.  If the Reinsurer assumes such
defense, the Company shall have the right, at its own expense, to participate
jointly with the Reinsurer in the defense thereof.  If the Reinsurer assumes the defense of litigation, the Reinsurer
shall not settle such litigation without the Company’s prior written consent
(which consent shall not be unreasonably withheld or delayed) unless (i) there
is no finding or admission of any violation of law or any violation of the
rights of any Person, (ii) such settlement would not reasonably be expected to
have material adverse precedential consequences to the Company and (iii) the
sole relief provided is monetary damages that are paid in full by the
Reinsurer.

3.3.          Inspection.  The Company shall keep accurate and complete
records, files and accounts of all transactions and matters with respect to the
Reinsured Contracts and the administration hereof in accordance with Applicable
Law and its record management practices in effect from time to time for the
Company’s insurance business not covered by this Agreement.  The Reinsurer and its designated
representatives may upon reasonable notice inspect, at the offices of the
Company where such records are located, the papers and any and all other books
or documents of the Company reasonably relating to this Agreement, including
the Reinsured Contracts and the administration thereof by the Company
(including compliance with the provisions of Section 3.1), and shall have
access to appropriate employees and representatives of the Company, in each
case during normal business hours for such period as this Agreement is in
effect or for as long thereafter as the Company seeks performance by the
Reinsurer pursuant to the terms of this Agreement or the Reinsurer reasonably
needs access to such records for regulatory, tax or similar purposes.  The information obtained shall be used only
for purposes relating to the transactions contemplated under this Agreement.

 

 

6

 

 

3.4.          Errors and Omissions.  If any delay, omission, error or failure to pay amounts due or to
perform any other act required by this Agreement is unintentional and caused by
misunderstanding or oversight, the Company and the Reinsurer will adjust the situation
to what it would have been had the misunderstanding or oversight not
occurred.  The party first discovering
such misunderstanding or oversight, or an act resulting from such
misunderstanding or oversight, will notify the other party in writing promptly
upon discovery thereof, and the parties shall act to correct such
misunderstanding or oversight within twenty (20) Business Days of such other
party’s receipt of such notice. 
However, this Section shall not be construed as a waiver by either party
of its right to enforce strictly the terms of this Agreement.

3.5.          Age, Sex and Other Adjustments.  If the Company’s liability under any of the
Reinsured Contracts is changed because of a misstatement of age or sex or any
other material fact, the Reinsurer will share in the change proportionately to
the coinsurance share hereunder and the Company and the Reinsurer will make all
appropriate adjustments to amounts due each other under this Agreement.

3.6.          Setoff.  Any
debts or credits, matured or unmatured, in favor of or against either the
Company or the Reinsurer with respect to this Agreement or any other
reinsurance agreement between the Company and the Reinsurer, are deemed mutual
debts or credits, as the case may be, and shall be setoff from any amounts due
to the Company or the Reinsurer hereunder, as the case may be, and only the net
balance shall be allowed or paid.

3.7.          Administration by Reinsurer.  (a) 
At any time from and after the fifteenth (15th) anniversary of the
Inception Date, the Reinsurer shall have the right to assume from the Company
the administration of the Reinsured Contracts, provided that the
Reinsurer provides twelve (12) months prior written notice of such assumption,
which notice may be given as early as the fourteenth (14th) anniversary of the
Inception Date to take effect as of the fifteenth (15th) anniversary of the
Inception Date.  The Reinsurer shall
bear all transition costs associated with an assumption of the administration
of the Reinsured Contracts pursuant to this paragraph (a) of this Section 3.7.

(b)   In addition to the provisions of Section
3.7(a), the Reinsurer shall have the right, upon written notice to the Company
to assume from the Company the administration of the Reinsured Contracts upon
the occurrence of any of the following events:

(i)                 A voluntary or
involuntary proceeding is commenced in any jurisdiction by or against the
Company for the purpose of conserving, rehabilitating or liquidating the
Company;

(ii)              There is a
material breach by the Company of any material term or condition of this Article III  that is not cured by the Company within
thirty (30) days after receipt of written notice from the Reinsurer of such
breach or act (provided that the Reinsurer shall not have the right to assume
such administration (A) for so long as the Company is making a good faith
effort to cure such a breach, not to exceed an additional one hundred eighty
(180) days or (B) during the pendency of any dispute resolution 

 

 

7

 

 

proceedings as set forth in Article XIII regarding an alleged material
breach); or

(iii)           The Company is
unable to perform the services required under this Article III for a period of
thirty (30) consecutive days for any reason, other than as a result of a Force
Majeure, it being understood that nothing in this Section 3.7(b)(iii) shall
relieve the Company from its administrative responsibilities under this
Agreement.  For purposes of this
Agreement “Force Majeure” means any acts or omissions of any civil or military
authority, acts of God, acts or omissions of the Reinsurer, fires, strikes or
other labor disturbances, equipment failures, fluctuations or non-availability
of electrical power, heat, light, air conditioning or telecommunications
equipment, or any other act, omission or occurrence beyond the Company’s
reasonable control, irrespective of whether similar to the foregoing enumerated
acts, omissions or occurrences.

(c)   The Company shall bear all transition costs
associated with an assumption of the administration of the Reinsured Contracts
pursuant to Section 3.7(b).

(d)   In the event of the Reinsurer’s assumption of
the administration of the Reinsured Contracts, the Reinsurer and the Company
shall enter into an administrative services agreement in the form attached
hereto as Schedule B and the provisions of Article VI and Article VII shall
become inoperative.

ARTICLE IV

 

CLAIMS
SETTLEMENT ACCOUNT; CLAIMS

 

4.1.          Claims Settlement Account.  (a)  On the Closing Date,
the Reinsurer shall establish a separate bank account (the “Claims Settlement
Account”) in its own name for the payment of Benefits and shall authorize two
signatories who shall be representatives of the Company and approved by the
Reinsurer in writing to issue drafts in the name of the Reinsurer and showing
the identity of the Company.  The
Reinsurer shall fund such account for payment of Benefits in accordance with
the provisions of Section 4.1(b).  Any
interest earned on the Claims Settlement Account shall belong to the
Reinsurer.  The Claims Settlement
Account shall be administered by the Company in a fiduciary capacity and shall
be used solely by the Company to make payments of Benefits in accordance with
the terms of this Agreement.

(b)   The Reinsurer shall deposit $47 million in
the Claims Settlement Account on the Closing Date and shall thereafter fund the
Claims Settlement Account on or before the fifth (5th) day of each month in
amounts agreed by the Company and the Reinsurer from time to time in amounts
sufficient to provide funds to the Company for the payment of Benefits during
the next thirty (30) days, or such other amount as may be mutually agreed by
the parties (such initial deposit amount and each minimum funding amount as
agreed from time to time shall be referred to as a “Minimum Claims Settlement
Amount”).  In addition, the Reinsurer
shall deposit to the Claims Settlement Account such additional amounts as may
be required to keep 

 

 

8

 

 

the
balance of such account above zero at all times.  In consideration of the Reinsurer providing the Claims Settlement
Account arrangement, the Company agrees that it shall apply funds in the Claims
Settlement Account against the Reinsurer’s liability under this Agreement until
such funds are exhausted.

(c)   The Company shall keep true and complete
records, in accordance with Applicable Law and its record management practices
in effect from time to time for the Company’s insurance business not covered by
this Agreement, clearly recording the deposits in and withdrawals from the
Claims Settlement Account, including records relating to the payment of
Benefits from the Claim Settlement Account. 
The Company will make available to the Reinsurer or its designated representative,
or shall furnish to the Reinsurer or its designated representative, upon
request of the Reinsurer or its designated representative, copies of all such
records.  All copies furnished in the
ordinary course of business shall be furnished by the Company at the Company’s
cost, which shall be included in the Expense Allowance.  Any extraordinary costs reasonably incurred
by the Company in response to requests from the Reinsurer shall be reimbursed
by the Reinsurer.

(d)   Within thirty (30) days after each calendar
month (or more frequently as mutually agreed by the parties), the Company shall
render a complete accounting to the Reinsurer detailing all transactions with
respect to the Claims Settlement Account, in such form as agreed by the
parties.

(e)   The parties agree to deliver to the depository
bank such depository resolutions, signature cards,
and other documents as may be requested of them in order to use such
accounts at the depository bank in accordance with the provisions of this
Article IV.

(f)    Upon a termination of this Agreement pursuant
to Article VIII, the Reinsurer shall close the Claims Settlement Account and
any closing balance therein shall be the property of the Reinsurer.  The Company’s claims payment authority under
this Agreement with respect to the Claims Settlement Account shall terminate
immediately upon termination of this Agreement pursuant to Article VIII or the
assumption by the Reinsurer of the administration of the Reinsured Contracts
pursuant to Section 3.7.  Upon termination
of its authority to pay claims, the Company shall promptly return to the
Reinsurer all unused check stock held by it in connection with this Agreement.

ARTICLE V

 

REINSURANCE
ASSET TRANSFER; CEDING COMMISSION

 

5.1.          Initial Reinsurance Premium.  As consideration for the reinsurance by the
Reinsurer of the Reinsured Risks under this Agreement, on the Closing Date the
Reinsurer shall be entitled to an amount equal to one hundred percent (100%) of
the Total SAP Ceded Reserves as of the close of business on the day immediately
preceding the Inception Date (the “Initial Reinsurance Premium”).

 

 

9

 

 

5.2.          Ceding Commission. 
On the Closing Date, the Company shall be entitled to a ceding
commission (the “Ceding Commission”) in an amount determined in accordance with
Schedule C.

5.3.          Amounts Due the Parties.  (a)  Except as otherwise
specifically provided herein, all amounts due to be paid to the Company under
this Agreement shall be determined on a net basis, giving full effect to
Section 3.6.  The net amount due
the Reinsurer from the Company on the Closing Date under Section 5.1 and
Section 5.2 shall consist of (i) the investment assets (the “Assets”) set forth
on Schedule D, which assets have a statutory book value as of the close of
business on the day immediately preceding the Inception Date equal to (A) the
Initial Reinsurance Premium, less (B) the Ceding Commission, less (C) an amount
equal to accrued but unpaid interest on the Assets as of the close of business
on the day immediately preceding the Inception Date, plus (ii) an amount equal
to the investment cash flows received on the Assets between the Inception Date
and the Closing Date.  The Company shall
pay such net amount concurrent with its delivery of the Initial Report.  Each net amount subsequently due with
respect to each Accounting Period ending after the Inception Date (the
“Quarterly Settlement”) shall be paid in cash by the Reinsurer to the Company
no later than thirty (30) days after delivery of the Quarterly Report, as
applicable.  Each net amount
subsequently due with respect to each calendar year ending after the Inception
Date as reflected on an Annual Report shall be paid in cash by the Reinsurer to
the Company no later than thirty (30) days after delivery of the Annual Report.

(b)   The Company shall deliver to the Reinsurer
possession of the Assets and such bills of sale, endorsements, assignments and
other good and sufficient instruments of conveyance and transfer in form and
substance reasonably acceptable to the parties as shall be effective to vest in
the Reinsurer all of the right, title and interest of the Company in and to the
Assets.  Delivery of the Assets shall be
a condition precedent of reinsurance coverage hereunder.

ARTICLE VI

 

EXPENSE
ALLOWANCES

 

6.1.          Expense Allowance. 
As reimbursement for expenses incurred by the Company in the providing
of policyholder and Benefit payment services with respect to the Reinsured
Contracts, the Reinsurer shall pay to the Company with respect to each calendar
month ending after the Inception Date, an expense allowance (each an “Expense
Allowance”) in an amount calculated in accordance with Schedule E, as
subsequently adjusted in accordance with the methodology and procedures set
forth on Schedule E.

 

 

10

 

 

ARTICLE VII

 

ACCOUNTING
AND SETTLEMENT

 

7.1.          Initial Report. 
A report shall be provided by the Company to the Reinsurer on the
Closing Date providing the data required in Schedule F - Part I
(the “Initial Report”).

7.2.          Quarterly Settlement Reports.  As soon as practicable but not more than
forty (40) days following each Accounting Period ending after the Closing Date
(or more frequently as mutually agreed by the parties), the Company shall
supply the Reinsurer with a report that shall provide the financial data for
such Accounting Period required in Schedule F - Part II (the
“Quarterly Report”).  For the avoidance
of doubt, the first Quarterly Report will include all transactions with respect
to the Reinsured Contracts occurring from the Inception Date through June 30,
2004.

7.3.          Quarterly Financial Reports.  As soon as practicable but not more than
forty (40) days following the end of each Accounting Period ending after the
Closing Date (or more frequently as mutually agreed by the parties), the
Company shall supply the Reinsurer with reports related to the Reinsured
Contracts as may be reasonably requested for use in connection with the
preparation of the Reinsurer’s SAP financial statements or other reports
prepared by the Reinsurer in compliance with its internal reporting
requirements.  The parties shall
cooperate in good faith to establish the form for the providing of such
reports.

7.4.          Annual Reports. 
Within forty-five (45) days after the end of each calendar year during
the term of this Agreement (or more frequently as mutually agreed by the
parties), the Company shall supply the Reinsurer with a report that shall
provide the financial data for such year required in Schedule F -
Part III (the “Annual Report”).

7.5.          Additional Reports and Updates.  For so long as this Agreement remains in
effect, each of the parties shall periodically furnish to the other such other
reports and information as may be reasonably requested by such other party for
regulatory, tax or similar purposes and reasonably available to it.

7.6.          Delayed Payments. 
In the event that all or any portion of any payment due either party
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.

ARTICLE VIII

 

DURATION
AND TERMINATION

 

8.1.          Duration. 
Except as otherwise provided herein, this Agreement shall be unlimited
in duration.

 

 

11

 

 

8.2.          Reinsurer’s Liability.  The Reinsurer’s liability with respect to the Reinsured Risks
will terminate on the earliest of: 
(i) the date the Company’s liability with respect to the Reinsured
Risks is terminated and all amounts due the Company from the Reinsurer with
respect to such Reinsured Risks are paid to the Company by or on behalf of the
Reinsurer; and (ii)  the date this Agreement is terminated upon the
written agreement of the parties.

8.3.          Notice of Termination.  Upon the termination of the Reinsurer’s liability with respect to
the Reinsured Risks referred to in Section 8.2 above, the parties shall
mutually give the Trustee written notice of their intention to terminate the
Trust Account.

ARTICLE IX

 

INSOLVENCY

 

9.1.          Payments.  In
the event of the insolvency of the Company, the reinsurance payable by the
Reinsurer hereunder shall be payable directly to the Company or to its
domiciliary liquidator or receiver on the basis of the liability of the
Reinsurer under the contract or contracts reinsured, without diminution because
of the insolvency of the Company.  It is
agreed and understood, however, that (i) in the event of the insolvency of the
Company, the Reinsurer shall be given written notice of the pendency of a claim
against the insolvent Company on a Reinsured Contract within a reasonable time
after such claim is filed in the insolvency proceeding and (ii) during the
pendency of such claim the Reinsurer may investigate such claim and interpose,
at its own expense, in the proceeding where such claim is to be adjudicated any
defenses which it may deem available to the Company or its domiciliary
liquidator, receiver or statutory successor.

9.2.          Expenses.  It
is further understood that any expense thus incurred by the Reinsurer pursuant
to Section 9.1 shall be chargeable, subject to court approval, against the
insolvent Company as part of the expense of liquidation to the extent of a
proportionate share of the benefit which may accrue to the Company solely as a
result of the defense undertaken by the Reinsurer.  Where two or more assuming reinsurers are involved in the same
claim and a majority in interest elect to interpose defenses to such claim, the
expense shall be apportioned in accordance with the terms of this Agreement as
though such expense had been incurred by the Company.

ARTICLE X

 

CREDIT
FOR REINSURANCE

 

10.1.        Reinsurance Credit. 
Notwithstanding any other provision of this Agreement to the contrary,
if the Reinsurer becomes unauthorized or otherwise unaccredited as an insurer
or reinsurer in any U.S. jurisdiction to which the Company must provide
statutory statements of financial condition such that the Company will not
obtain full statutory financial statement credit for reinsurance in such state
for the reinsurance provided under this Agreement, the Reinsurer, upon the
request of the Company, will establish, at the Reinsurer’s sole cost and 

 

 

12

 

 

option, trust accounts for
the benefit of the Company, letters of credit, or other acceptable alternatives
necessary to permit the Company to obtain such full statutory financial
statement credit for such reinsurance in all applicable jurisdictions.  The Company shall cooperate with the
Reinsurer to take such steps.  In
addition, in such event, the Reinsurer agrees to amend this Agreement and the
Trust Agreement to the extent required under Applicable Law in order to provide
the Company with such full statutory financial statement credit.

ARTICLE XI

 

REINSURANCE
SECURITY

 

11.1.        Trust. 
(a)  On the Closing Date, the
Reinsurer shall enter into a trust agreement in the form attached as Schedule G
(the “Trust Agreement”) and establish a trust account (the “Trust Account”) for
the benefit of the Company with respect to the Reinsured Risks with a bank (the
“Trustee”) designated as a Qualified United States Financial Institution by the
Securities Valuation Office of the National Association of Insurance Commissioners
or any successor organization or regulatory agency having similar duties.

(b)   The Reinsurer agrees to deposit, and maintain
in the Trust Account with respect to this Agreement, assets to be held in trust
by the Trustee for the benefit of the Company as security for the payment of
the Reinsurer’s obligations to the Company under this Agreement.

(c)   The parties agree that the assets so
deposited with respect to this Agreement shall be valued according to their
current statutory book value on the books of the Reinsurer and shall consist
only of cash (United States legal tender), certificates of deposit (issued by a
United States bank and payable in United States legal tender), and other assets
of the type specified on Schedule H attached hereto (“Eligible Securities”).

(d)   The Reinsurer, prior to depositing assets
with the Trustee, shall execute all assignments and endorsements in blank, or
transfer legal title to the Trustee of all shares, obligations or any other
assets requiring assignments, in order that, to the extent practicable, the
Company, or the Trustee upon direction of the Company, may whenever necessary
negotiate any such assets without consent or signature from the Reinsurer or
any other entity.  The Company
recognizes that certain assets in the Trust Account will not be readily
negotiable and that certain notices, opinions of counsel, representations
and/or consents will be required for the Company to obtain good and marketable
title to such assets.

(e)   The Reinsurer and the Company agree that the
assets in the Trust Account with respect to this Agreement may be withdrawn for
the following purposes only:

(i)                 to pay or
reimburse the Company for any amount due the Company pursuant to this Agreement
to the extent not so paid or reimbursed by the Reinsurer;

(ii)              to pay to the
Reinsurer, in accordance with paragraph (h) below, any amounts held in the
Trust Account that exceed an amount (the “Funding 

 

 

13

 

 

Requirement”)
equal to the sum of Total SAP Ceded Reserves and any additional reserves
attributable to the Reinsured Risks that arise as a result of regulatory asset
adequacy analysis requirements of the Reinsurer, less, prior to the date on
which the Claims Settlement Account is closed, the Minimum Claims Settlement
Amount then in effect; and

(iii)           in the event
that General Electric Capital Corporation breaches its obligations under the
Capital Maintenance Agreement, to fund an account with the Company (the
“Company Account”) in an amount at least equal to the deduction, for
reinsurance ceded, from the Company’s liabilities ceded under this
Agreement.  Such amount shall include,
but not be limited to, amounts for policy reserves, reserves for claims and
losses incurred (including losses incurred but not reported), loss and loss
adjustment expenses, and unearned premiums.

(f)    In the event that the Company withdraws
assets from the Trust Account for the purposes set forth in Section 11.1(e)(i)
above in excess of actual amounts required to meet the Reinsurer’s obligations
to the Company, the Company will promptly return such excess to the Reinsurer,
plus interest at an annual rate equal to the then current thirty (30) day U.S.
Treasury Bill discount rate on the date of withdrawal plus 200 basis points for
the period during which the amounts were held pursuant to Section
11.1(e)(i).  In the event that the
Company withdraws assets from the Trust Account for the purposes set forth in
Section 11.1(e)(iii) above, (i) the Reinsurer shall be relieved of its
obligation to maintain assets in the Trust Account pursuant to this Section
11.1 to the extent of the amount of funds held in the Company Account and (ii)
the Company shall first apply the funds in the Company Account in satisfaction
of the Reinsurer’s liability under this Agreement until the funds in the
Company Account are exhausted.  In the
event that the Company withdraws assets from the Trust Account for the purposes
set forth in Section 11.1(e)(iii) above, promptly following the date the
Reinsurer’s liability with respect to the Reinsured Risks is terminated, the
Company shall return to the Reinsurer any assets so withdrawn that, together
with any and all interest, dividends and other earnings thereon from the date
of withdrawal to the date of return, are in excess of actual amounts required
to meet the Reinsurer’s obligations to the Company under this Agreement.

(g)   The initial deposit to the Trust Account with
respect to this Agreement shall be made on the Closing Date and shall consist
of assets with a statutory book value equal to the Total SAP Ceded Reserves as
of the close of business on the day immediately preceding the Inception Date,
less an amount of assets with a statutory book value equal to the initial
Minimum Claims Settlement Amount.

(h)   The aggregate statutory book value of the
assets held in the Trust Account with respect to this Agreement, shall at all
times be at least equal to the Funding Requirement, and shall be adjusted on a
quarterly basis so as to equal the Funding Requirement.  On a quarterly basis, the Company shall
promptly prepare and deliver to the Reinsurer a specific statement of the
Funding Requirement and the Reinsurer shall promptly prepare and deliver to the
Company a specific statement of the statutory book value of the assets in the
Trust Account, in each case as of the end of the quarter.  If the statement shows that the Funding
Requirement exceeds 100% of the balance of the Trust Account with respect to
this Agreement as of the 

 

 

 

14

 

 

statement
date, the Reinsurer shall, within ten (10) Business Days after receipt of such
notice of excess, secure delivery to the Trustee of additional cash or Eligible
Securities having a current statutory book value equal to such difference.  If the statement shows that the Funding
Requirement is less than 100% of the balance of the Trust Account with respect
to this Agreement as of the statement date, the Company shall, within ten (10)
Business Days after delivery of such statement to the Reinsurer, deliver a
notice of withdrawal to the Trustee directing the Trustee to withdraw from the
Trust Account and deliver to the Reinsurer assets from the Trust Account having
a current statutory book value equal to such excess amount.  In addition to the foregoing, the Reinsurer
shall prepare and deliver to the Company on a quarterly basis a specific
statement of the market value of the assets in the Trust Account as of the end
of the quarter.

ARTICLE XII

 

DEFERRED
ACQUISITION COSTS

 

12.1.        Tax DAC Information Sharing.   To ensure consistency in their respective Tax DAC calculations
for tax purposes, the Company and the Reinsurer will exchange information
pertaining to the amount of net consideration under this Agreement each year.  The Company will submit a schedule to the
Reinsurer by February 28 of each year presenting its calculation of the net
consideration for the preceding taxable year. 
The Reinsurer may contest the calculation by providing to the Company an
alternative calculation in writing within thirty (30) days of receipt of the
Company’s schedule.  The Company and the
Reinsurer will act in good faith to resolve any differences in the schedule of
calculations within thirty (30) days of receipt of the alternative calculation
to ensure consistent amounts are reported on the respective tax returns for the
preceding tax year.

ARTICLE XIII

 

DISPUTE
RESOLUTION

 

13.1.        General
Provisions.  (a) Any dispute, controversy or
claim arising out of or relating to this Agreement or the validity, interpretation,
breach or termination thereof (a “Dispute”), shall be resolved in accordance
with the procedures set forth in this Article XIII, 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 13.2, 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 13.3, 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.

 

 

15

 

(c)   In connection with any Dispute, the parties
expressly waive and forego any right to (i) punitive, exemplary,
statutorily-enhanced or similar damages in excess of compensatory 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 XIII are pending. 
The parties will take such action, if any, required to effectuate such
tolling.

13.2.        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.

13.3.        Mediation. If a Dispute is not
resolved by negotiation as provided in Section 13.2 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 the Company, or the Reinsurer, 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.

13.4.        Arbitration. (a) If a Dispute is not resolved by mediation as
provided in Section 13.3 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 the Company, or the Reinsurer, or
any of their respective affiliates.  The
arbitration shall be conducted in New York 

 

 

 

16

 

 

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 Virginia, 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.  The arbitral tribunal shall
endeavor to render its award or order resulting from any arbitration within
forty-five (45) days following the termination of the arbitration proceedings.

(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 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 13.4(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 XIII.

ARTICLE XIV

 

MISCELLANEOUS
PROVISIONS

 

14.1.        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.

14.2.        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 

 

 

17

 

 

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 the Company:

First Colony Life Insurance Company

700 Main Street

Lynchburg, VA 24504

Facsimile:  (434) 948-5064

Attention:  Chief Executive Officer

 

 

With a copy to:

First Colony Life Insurance Company

700 Main Street

Lynchburg, VA 24504

Facsimile:  (434) 948-5819

Attention:  General Counsel

If to the Reinsurer:

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.

14.3.        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 14.3 shall be void and shall have no
force and effect.  Nothing in this 

 

 

18

 

 

Section
14.3 shall be construed to prohibit the Reinsurer from retroceding all or any
portion of the business reinsured hereunder.

14.4.        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.

14.5.        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.

14.6.        Amendments. 
This Agreement may not be changed, altered or modified unless the same
shall be in writing executed by the Company and the Reinsurer.

14.7.        Governing Law. 
This Agreement will be
construed, performed and enforced in accordance with the laws of the
Commonwealth of Virginia 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.

14.8.        Entire Agreement; Severability.  (a) 
This Agreement and the Termination Letter Agreement constitute the
entire agreement between the parties hereto relating to the subject matter
hereof and supersede 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 or in the
Termination Letter Agreement.

(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.

14.9.        Contemporaneous Agreements.  Concurrent with the execution of this Agreement, the parties
and/or their Affiliates are also entering into the Capital Maintenance
Agreement, the RBC Reporting Letter Agreement and the Assignment Letter
Agreement.

14.10.      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.

 

 

19

 

 

14.11.      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.

14.12.      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.

14.13.      Tax Exception to Any Confidentiality.  Notwithstanding anything to the contrary set
forth herein or in any other agreement to which the parties hereto are parties
or by which they are bound, any obligations of confidentiality contained herein
and therein, as they relate to the transactions, shall not apply to the federal
tax structure or federal tax treatment of the transactions, and each party
hereto (and any employee, representative, or agent of any party hereto) may
disclose to any and all persons, without limitation of any kind, the federal
tax structure and federal tax treatment of the transactions.  The preceding sentence is intended to cause
the transactions to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner
consistent with such purpose.  In
addition, each party hereto acknowledges that it has no proprietary or
exclusive rights to the federal tax structure of the transactions or any
federal tax matter or federal tax idea related to the transactions.

14.14.      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.”

14.15.      Survival.  Article XIII and Article XIV shall survive the termination of
this Agreement.

 

 

 

20

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.

	
   

  	
  FIRST
  COLONY LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Ward
  Bobitz

  
	
   

  	
   

  	
   

  	
  Name:
  Ward Bobitz

  
	
   

  	
   

  	
   

  	
  Title:
  Vice President

  

 

	
   

  	
  UNION
  FIDELITY LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
  /s/  Glenn
  Joppa

  
	
   

  	
   

  	
   

  	
  Name:
  Glenn Joppa

  
	
   

  	
   

  	
   

  	
  Title:
  Senior Vice President and Secretary

  

 

 

 

21

 

SCHEDULE A

 

POLICY FORMS

8001

8101

8201

8401

1700

ANN-PPR

ANN-PPR-Q

FCL RA&Q

 

SCHEDULE B

FORM OF
ADMINISTRATIVE SERVICES AGREEMENT

 

 

SSA UFLIC/FCL

 

 

 

 

 

ADMINISTRATIVE SERVICES AGREEMENT

by and between

FIRST COLONY LIFE INSURANCE COMPANY

and

UNION FIDELITY LIFE INSURANCE COMPANY

 

Effective as of
[          ]

 

 

 

 

ADMINISTRATIVE SERVICES AGREEMENT

This ADMINISTRATIVE SERVICES
AGREEMENT (this “Agreement”), effective as of
[                     ]
(the “Effective Date”), is entered into by and between FIRST COLONY LIFE
INSURANCE COMPANY, an insurance company organized under the laws of the Commonwealth
of Virginia (the “Company”), and UNION FIDELITY LIFE INSURANCE COMPANY, an
insurance company organized under the laws of the State of Illinois (the
“Administrator”).

RECITALS:

WHEREAS, the Company and the
Administrator have entered into a Coinsurance Agreement dated as of April 15,
2004 (the “Coinsurance Agreement”) which provides for the parties to enter into
this Agreement;

WHEREAS, pursuant to the
Coinsurance Agreement, the Administrator has agreed to indemnify the Company
for, among other things, 100% of the liability of the Company for Benefits
payable on or after the Inception Date with respect to the Reinsured Contracts
(capitalized terms used herein and not defined herein, unless otherwise
indicated, have the respective meanings assigned to them in the Coinsurance
Agreement); and

WHEREAS, the Company wishes
to appoint the Administrator to provide policyholder and claim servicing with
respect to the Reinsured Contracts, and the Administrator desires to provide
such administrative services;

NOW, THEREFORE, in
consideration of the covenants and agreements set forth herein, the parties
hereto agree as follows:

ARTICLE
I

 

AUTHORITY

 

The Company hereby appoints
the Administrator, and the Administrator hereby accepts appointment, to provide
as an independent contractor of the Company, from and after the Effective Date,
all of the policyholder and claim servicing services necessary or appropriate
with respect to the Reinsured Contracts including those set forth in this
Agreement (the “Administrative Services”), all on the terms as set forth in
this Agreement.  Notwithstanding any
other provision of this Agreement to the contrary, the Company shall have the
right to direct the Administrator to perform any action necessary for the
Reinsured Contracts or the policyholder and claim servicing thereof to comply
with Applicable Law, or to cease performing any action that constitutes a
violation of Applicable Law.

 

ARTICLE
II

 

STANDARD
FOR SERVICES; FACILITIES; SUBCONTRACTING

 

2.1.          Standard for Services.  The Administrator shall provide policyholder and claims servicing
with respect to the Reinsured Contracts in good faith and with the care, skill,
prudence and diligence of a person experienced in administering structured
settlement business.  Without limiting
the generality of the foregoing, the Administrator shall provide policyholder
and claims servicing with respect to the Reinsured Contracts (i) in accordance
with the terms of the Reinsured Contracts, (ii) in accordance with the
applicable terms of this Agreement, (iii) 
in compliance with Applicable Law, (iv) in accordance with industry
standards and, subject to the foregoing, (v) to the extent applicable, in the
same manner as it conducts its own business not subject to this Agreement.

2.2.          Facilities and Personnel.  To the extent not sub-contracted to a Subcontractor, the
Administrator shall at all times maintain sufficient facilities and trained
personnel of the kind necessary to perform its obligations under this Agreement
in accordance with the performance standards set forth herein.

2.3.          Subcontracting. 
The Administrator may subcontract for the performance of any
policyholder or claims servicing service or services with respect to the
Reinsured Contracts to (i) an Affiliate or (ii) any other Person with the prior
written consent of the Company, such consent not to be unreasonably withheld
(in each case, the “Subcontractor”); provided, that, no such
subcontracting shall relieve the Administrator from any of its obligations or
liabilities hereunder, and the Administrator shall remain responsible for all
obligations or liabilities of such Subcontractor with regards to the providing
of such service or services as if provided by the Administrator.

ARTICLE
III

 

CLAIMS
HANDLING

 

The Administrator shall pay
all Benefits payable on or after the Inception Date with respect to the
Reinsured Contracts (each, a “Claim” and collectively the “Claims”).

ARTICLE
IV

 

REGULATORY
AND LEGAL PROCEEDINGS

 

4.1.          Regulatory Complaints and Proceedings.  The Administrator shall:

(i)                 respond to any
Claims payment related complaints or inquiries made by any Governmental
Authority, within the Governmental Authority’s requested time frame for
response or, if no such time frame is provided, within the time frame as
allowed by Applicable Law; and promptly provide a copy of such response to the
Company;

 

 

2

 

 

(ii)              promptly notify
the Company of any non-Claims payment related complaints or inquiries initiated
by a Governmental Authority, and of any proceedings (either Claims or
non-Claims related) initiated by a Governmental Authority, and, in either case,
prepare and send to the Governmental Authority, with a copy to the Company, a
response within the Governmental Authority’s requested time frame for response
or, if no such time frame is provided, within the time frame as allowed by
Applicable Law; provided, that, subject to meeting such time frames, the
Administrator shall provide such response to the Company for its prior review
and comment;

(iii)           subject to
Section 4.4, supervise and control the investigation, contest, defense
and/or settlement of all complaints, inquiries and proceedings by Governmental
Authorities at its own cost and expense, and in the name of the Company when
necessary; and

(iv)          at the
Company’s request, provide to the Company a report in a form mutually agreed by
the parties summarizing the nature of any complaints, inquiries or proceedings
by Governmental Authorities, the alleged actions or omissions giving rise to
such complaints, inquiries or proceedings and copies of any files or other
documents that the Company may reasonably request in connection with its review
of these matters.

4.2.          Legal Proceedings.  The Administrator shall:

(i)                 notify the
Company promptly of any lawsuit, action, arbitration or other dispute
resolution proceedings that are instituted or threatened with respect to any
matter relating to the Reinsured Contracts (“Legal Proceeding(s)”), and in no
event more than five (5) Business Days after receipt of notice thereof;

(ii)              subject to
Section 4.4, supervise and control the investigation, contest, defense
and/or settlement of all Legal Proceedings at its own cost and expense, and in
the name of the Company when necessary; and

(iii)           keep the Company
fully informed of the progress of all Legal Proceedings handled by the
Administrator in which the Company is named a party and, at the Company’s
request, provide to the Company a report summarizing the nature of any Legal
Proceedings, the alleged actions or omissions giving rise to such Legal
Proceedings and copies of any files or other documents that the Company may
reasonably request in connection with its review of these matters in each case
other than such files, documents and other information as would, in the
judgment of counsel to the Administrator, lead to the loss or waiver of legal
privilege.

4.3.          Notice to Administrator.  The Company shall give prompt notice to the Administrator of any
Legal Proceeding made or brought against the Company after the Inception 

 

 

3

 

 

Date arising under or in
connection with the Reinsured Contracts to the extent known to it and not made
against or served on the Administrator or a Subcontractor as administrator hereunder,
and in no event more than five (5) Business Days after receipt of notice
thereof, and shall promptly furnish to the Administrator copies of all
pleadings in connection therewith.  The
Administrator shall assume the defense of the Company.

4.4.          Defense of Regulatory and Legal Proceedings.  Notwithstanding anything in this Agreement
to the contrary, the Company shall have the right to engage in its own separate
legal representation, at its own expense, and to participate fully in the
defense of any Legal Proceedings or complaints, inquiries or proceedings by
Governmental Authorities with respect to the Reinsured Contracts in which the
Company is a named party without waiving any right to indemnification it may
have under Article XV hereof.  The
Administrator and the Company shall cooperate with each other with respect to
the administration of any Legal Proceeding and any complaint, inquiry or
proceeding by Governmental Authorities. 
The Administrator shall not settle any Legal Proceeding or any complaint,
inquiry or proceeding by Governmental Authorities without the Company’s prior
written consent (which consent shall not be unreasonably withheld or delayed)
unless (i) there is no finding or admission of any violation of law or any
violation of the rights of any Person, (ii) such settlement would not
reasonably be expected to have material adverse precedential consequences to
the Company and (iii) the sole relief provided is monetary damages that are
paid in full by the Administrator.

ARTICLE
V

 

NOTIFICATION
TO POLICYHOLDERS

 

The Administrator agrees to
send to policyholders of the Reinsured Contracts a written notice prepared by
the Administrator and reasonably acceptable to the Company to the effect that
the Administrator, or such other Person designated by the Administrator in
accordance with the terms of this Agreement, has been appointed by the Company
to provide Administrative Services.  The
Administrator shall send such notice by first class U.S. mail at a time
reasonably acceptable to the Company and the Administrator and in all events in
accordance with Applicable Law.  The
parties intend to minimize the cost associated with any notification under this
Article V, including by means of inclusion of the notice in a regularly
scheduled mailing to policyholders in lieu of a separate mailing.  The cost associated with such notification
under this Article V (upon the initial assumption of the administration of the
Reinsured Contracts under Section 3.7 of the Coinsurance Agreement) shall be a
transition cost payable by the Administrator or the Company in accordance with
Section 3.7(a) or 3.7(c) of the Coinsurance Agreement, as applicable.

ARTICLE
VI

 

INSOLVENCY
FUND ACCOUNTINGS

 

6.1.            Quarterly Accountings.  Within thirty (30) days after the end of each calendar quarter
that this Agreement is in effect (or more frequently as mutually agreed by the 

 

 

 

4

 

 

parties), the Company shall
submit to the Administrator a written statement of accounting in a form and containing
such information to be agreed upon by the parties hereto (each, an “Insolvency
Fund Quarterly Accounting”) setting forth the Insolvency Fund amounts assessed
or payable to the extent that such assessments constitute Reinsured Risks with
respect to the Reinsured Contracts (collectively, the “Post-Effective Date
Assessments”).  The Administrator shall
remit to the Company an amount equal to the Post-Effective Date Assessments set
forth in an Insolvency Fund Quarterly Accounting received by the Administrator
within ten (10) Business Days of receipt by the Administrator of such
Insolvency Fund Quarterly Accounting.

6.2.          Adjustments Regarding Insolvency Fund Accountings.  In the event that subsequent data or
calculations require revision of any of the Insolvency Fund Quarterly
Accountings, the required revision and appropriate payments thereunder shall be
made within ten (10) Business Days after the parties hereto mutually agree as
to the appropriate revision.

ARTICLE
VII

 

CERTAIN
ACTIONS BY COMPANY

 

7.1.          Filings.  The
Company shall prepare and timely file any filings required to be made with any
Governmental Authority that relate to the Company generally and not just to the
Reinsured Contracts, including filings with guaranty associations and filings
and premium tax returns with taxing authorities.  The Administrator shall, in a timely fashion in light of the
dates such filings by the Company are required, provide to the Company all
information in the possession of the Administrator with respect to the Reinsured
Contracts that may be reasonably required for the Company to prepare such
filings and tax returns.

7.2.          Annual Adjustment. 
The Company shall pay or provide to the Administrator the benefit of any
Post-Effective Date Assessments which have been or can be applied to reduce the
Company’s premium tax liability (“Premium Tax Credits”).  The Company shall provide to the
Administrator by March 15 of each year a statement of the amount of Premium Tax
Credits for the prior calendar year and the Company will pay or credit to the
Administrator an amount equal to such Premium Tax Credits.

ARTICLE
VIII

 

REGULATORY
MATTERS AND AUDIT REPORTING

 

8.1.          Regulatory Compliance and Reporting.  The Administrator shall provide to the
Company such information with respect to the Reinsured Contracts as is required
to satisfy all current and future informational reporting, prior approval and
any other requirements imposed by any Governmental Authority.  Upon the reasonable request of the Company,
the Administrator shall timely prepare such reports and summaries, including
statistical summaries, as are necessary or reasonably required to satisfy any
requirements imposed by a Governmental Authority upon the Company with respect
to the Reinsured Contracts.  In
addition, the Administrator, upon the reasonable request of the Company, shall
promptly provide to the Company copies of all existing records relating to the
Reinsured Contracts (including, with 

 

 

5

 

 

respect to records maintained
in machine readable form, hard copies) that are necessary to satisfy such
requirements.  All copies of records
furnished in the ordinary course of business shall be furnished by the
Administrator at the Administrator’s cost. 
Any extraordinary costs reasonably incurred by the Administrator in
response to requests from the Company shall be reimbursed by the Company.  Among other responsibilities:

(i)                 The
Administrator shall promptly prepare and furnish to Governmental Authorities
all reports and related summaries (including, without limitation, statistical
summaries), certificates of compliance and other reports required or requested
by a Governmental Authority.

(ii)              The
Administrator shall assist the Company and cooperate with the Company in doing
all things necessary, proper or advisable, in the most expeditious manner
practicable in connection with any and all market conduct or other Governmental
Authority examinations relating to the Reinsured Contracts.

8.2.          Reporting and Accounting.  The Administrator shall assume the reporting and accounting
obligations set forth below:

(i)                 As soon as
practicable but not more than forty (40) days after the end of each calendar
quarter that this Agreement is in effect (or more frequently as mutually agreed
by the parties), the Administrator shall timely provide to the Company reports
and summaries of transactions (and, upon request of the Company, detailed
supporting records) related to the Reinsured Contracts as may be reasonably
required for use in connection with the preparation of the Company’s statutory
and GAAP financial statements, tax returns and other required financial reports
and to comply with the requirements of the regulatory authorities having
jurisdiction over the Company.  The
parties shall cooperate in good faith to establish the manner for the providing
of such reports.

(ii)              As soon as
practicable but not more than forty (40) days after the end of each calendar
quarter that this Agreement is in effect (or more frequently as mutually agreed
by the parties), the Administrator shall report to the Company the amount of
statutory reserves that the Company is required to maintain in connection with
the Reinsured Risks with respect to the Reinsured Contracts as of the quarter
end.

(iii)           The
Administrator shall promptly provide notice to the Company of any changes in
the reserve methodology used by the Administrator in calculating statutory
reserves for the Reinsured Contracts.

(iv)          Within
forty-five (45) days after each calendar year end (or such longer time as may
be agreed by the parties) that this Agreement is in effect, the Administrator
shall provide to the Company (a) an opinion of an actuary reasonably acceptable
to the Company as to the adequacy of statutory 

 

 

6

 

 

reserves
for the Reinsured Contracts, prepared according to accepted actuarial standards
of practice, and as otherwise required for regulatory reporting purposes and
(b) an analysis which reasonably supports such opinion.

8.3.          Additional Reports and Updates.  For so long as this Agreement remains in
effect, each party shall periodically furnish to the other such other reports
and information as may be reasonably required by such other party for
regulatory, tax or similar purposes and reasonably available to it.

ARTICLE
IX

 

MISCELLANEOUS
ADMINISTRATIVE SERVICES

 

The Administrator shall
provide such other Administrative Services as are necessary or appropriate to
fully effectuate the purpose of the Reinsurance Agreement and this Agreement,
including such Administrative Services as are not performed by or on behalf of
the Company on the date hereof but the need for which may arise due to changes
or developments in Applicable Law.

ARTICLE
X

 

BOOKS
AND RECORDS

 

The Administrator shall keep
accurate and complete records, files and accounts of all transactions and
matters with respect to the Reinsured Contracts and the administration thereof
in accordance with Applicable Law and its record management practices in effect
from time to time for the Administrator’s insurance business not covered by
this Agreement, if any.  The parties to
this Agreement and their designated representatives may upon reasonable notice
inspect, at the offices of the Administrator or the Company where such records
are located, the papers and any and all other books or documents of the
Administrator or the Company reasonably relating to this Agreement, including
the Reinsured Contracts, and shall have access to appropriate employees and
representatives of the other party, in each case during normal business hours
for such period as  this Agreement is in
effect or for as long thereafter as any rights or obligations of any party
survives or the Administrator or the Company reasonably need access to such
records for regulatory, tax or similar purposes. The information obtained shall
be used only for purposes relating to the transactions contemplated under this
Agreement.

ARTICLE
XI

 

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 

 

7

 

furnishing
any additional assistance, information and documents as may be reasonably
requested by a party from time to time.

ARTICLE
XII

 

PRIVACY
REQUIREMENTS

 

In providing the
Administrative Services provided for under this Agreement, and in connection
with maintaining, administering, handling and transferring the data of the
policyholders and other recipients of benefits under the Reinsured Contracts,
the Administrator shall, and shall cause its Affiliates and any permitted
Subcontractors to, comply with all confidentiality and security obligations
applicable to them in connection with the collection, use, disclosure,
maintenance and transmission of personal, private, health or financial
information about individual policyholders or benefit recipients, including the
provisions of privacy policies under which such information was gathered, those
laws currently in place and which may become effective during the term of this
Agreement, including the Gramm-Leach-Bliley Act, the Health Insurance
Portability and Accountability Act of 1996 and any other Applicable Laws.  The Administrator shall entitle the Company
and its agents and representatives, the Commissioner of Health and Human
Services and such other Governmental Authorities, to the extent required by
Applicable Law, to audit the Administrator’s compliance herewith.  The Administrator shall also enable
individual subjects of personally identifiable information, upon request from
such individuals, to review and correct information maintained by the
Administrator about them, and to restrict use of such information.  The Administrator shall promptly report to
the Company any violation of this provision of which the Administrator becomes
aware.  Unless required by Applicable
Law, the Administrator shall not during the term of this Agreement, modify the
privacy policies under which information utilized by the Administrator in
administering the Reinsured Contracts is gathered, without the Company’s prior
written consent, which consent shall not be unreasonably withheld.  The parties agree to comply with the terms
of the Business Associate Addendum attached hereto, if applicable, or such
other written agreement as may be required by Applicable Law on the date
hereof.

ARTICLE
XIII

 

CONSIDERATION
FOR ADMINISTRATIVE SERVICES

 

Apart from the performance
by the Company of its obligations under the Coinsurance Agreement, there shall
be no fee or other consideration due to the Administrator for performance of
the Administrative Services under this Agreement.

ARTICLE
XIV

 

BANK
ACCOUNT; USE OF COMPANY LETTERHEAD

 

When and on terms reasonably
requested by the Administrator, the Company shall open, modify or close, and
make available for use by the Administrator for the payment of amounts to 

 

8

 

be
paid by the Administrator hereunder one or more bank accounts of the Company
and check stock of the Company.  The
Administrator shall maintain such account(s) and pay all applicable bank fees
and check stock costs.  The Company
shall adopt such resolutions and execute such documents as required to
designate senior officers of the Administrator (by title) as signatories on
such account(s) and authorize the Administrator to certify to such bank(s),
from time to time, the names of such officers. 
The Company shall also make available to the Administrator, at the sole
expense of the Administrator, such letterhead, printed forms and other
documents of the Company as may be reasonably required by the Administrator in
performing services hereunder.  Upon
termination of this Agreement, the Administrator shall promptly return to the
Company all such unused check stock, letterhead, printed forms and other
documents held by it in connection with this Agreement as provided under this
Article XIV.

ARTICLE
XV

 

INDEMNIFICATION

 

Any claim for or with
respect to indemnification arising out of, or relating to, this Agreement or
the Administrative Services hereunder shall be permitted under and governed by
the provisions of Article V of the Master Agreement, dated as of [             ], 2004, among General Electric
Company, General Electric Capital Corporation, GEI, Inc., GE Financial
Assurance Holdings, Inc. and Genworth Financial, Inc (the “Master Agreement”),
to the extent such provisions are applicable, as if this Agreement were a Transaction
Document under the Master Agreement.

ARTICLE
XVI

 

DURATION;
TERMINATION

 

16.1.        Duration.  This
Agreement shall commence on the Effective Date and continue with respect to
each Reinsured Contract until no further Administrative Services in respect of
such Reinsured Contract is required, unless this Agreement is earlier
terminated under Section 16.2.

16.2.        Termination. 
(a)  This Agreement is subject to
immediate termination at the option of the Company, upon written notice to the
Administrator, on the occurrence of any of the following events:

(i)                 A voluntary or
involuntary proceeding is commenced in any jurisdiction by or against the
Administrator for the purpose of conserving, rehabilitating or liquidating the
Administrator;

(ii)              There is a material
breach by the Administrator of any material term or condition of this Agreement
that is not cured by the Administrator within thirty (30) days after receipt of
written notice from the Company of such breach or act (provided that the
Company shall not have the right to terminate this Agreement (A) for so long as
the Administrator is making a 

 

 

9

 

 

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 XVII regarding an alleged material breach);
or

(iii)           The
Administrator is 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, it being understood that nothing in this Section
16.2(a)(iii) shall relieve the Administrator from its administrative
responsibilities under this Agreement. 
For purposes of this Agreement, “Force Majeure” means any acts or
omissions of any civil or military authority, acts of God, acts or omissions of
the Company, fires, strikes or other labor disturbances, equipment failures,
fluctuations or non-availability of electrical power, heat, light, air
conditioning or telecommunications equipment, or any other act, omission or
occurrence beyond the Administrator’s reasonable control, irrespective of
whether similar to the foregoing enumerated acts, omissions or occurrences.

(b)   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.

(c)   In the event that this Agreement is
terminated under any of the provisions of Section 16.2(a), the
Administrator shall select a third-party administrator to perform the services
required by this Agreement.  The Company
shall have the right to approve any such administrator selected by the
Administrator, but such approval will not unreasonably be withheld or
delayed.  If the Administrator fails to
select an administrator pursuant to this Section 16.2(c), the Company
shall select such an administrator.  In
either case, the Administrator shall pay all fees and charges imposed by the
selected administrator and shall bear all transition costs associated with the
transition of the performance of the services required under this Agreement to
such administrator, including the expense of sending policyholder notices as
provided in Article V.

ARTICLE
XVII

 

DISPUTE
RESOLUTION

 

17.1.        General
Provisions.  (a) Any dispute, controversy or
claim arising out of or relating to this Agreement or the validity,
interpretation, breach or termination thereof (a “Dispute”), shall be resolved
in accordance with the procedures set forth in this Article XVII, 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 17.2, 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 17.3, shall be
deemed to have been delivered in furtherance of a Dispute settlement and shall
be exempt 

 

 

10

 

 

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) punitive, exemplary,
statutorily-enhanced or similar damages in excess of compensatory damages
(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 XVII are pending. 
The parties will take such action, if any, required to effectuate such
tolling.

17.2.        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.

17.3.        Mediation. If a Dispute is not
resolved by negotiation as provided in Section 17.2 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 the Company, or the Administrator, 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.

17.4.        Arbitration. (a) If a Dispute is not resolved by mediation as
provided in Section 17.3 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 

 

 

11

 

 

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 the
Company, or the Administrator, 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 Virginia, 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.  The arbitral tribunal shall endeavor to render its award or order
resulting from any arbitration within forty-five (45) days following the
termination of the arbitration proceedings.

(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 17.4 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 17.4(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 XVII.

 

 

12

 

ARTICLE
XVIII

 

MISCELLANEOUS
PROVISIONS

 

18.1.        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.

18.2.        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 the Company:

First Colony Life Insurance Company

700 Main Street

Lynchburg, VA 24504

Facsimile:  (434) 948-5064

Attention:  Chief Executive Officer

 

With a copy to:

First Colony Life Insurance Company

700 Main Street

Lynchburg, VA 24504

Facsimile:  (434) 948-5819

Attention:  General Counsel

 

If to the Administrator:

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:

 

13

 

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.

18.3.        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 18.3 shall be void and shall have
no force and effect.

18.4.        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.

18.5.        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.

18.6.        Amendments. 
This Agreement may not be changed, altered or modified unless the same
shall be in writing executed by the Company and the Administrator.

18.7.        Governing Law. 
This Agreement will be
construed, performed and enforced in accordance with the laws of the
Commonwealth of Virginia 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.

18.8.        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 or
provision 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, unenforceable
or violative provision to the extent necessary to render such provision
enforceable and to carry out its original intent.

 

14

 

 

18.9.        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.

18.10.          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.

18.11.          Tax Exception to Any
Confidentiality.  Notwithstanding
anything to the contrary set forth herein or in any other agreement to which
the parties hereto are parties or by which they are bound, any obligations of
confidentiality contained herein and therein, as they relate to the
transactions, shall not apply to the federal tax structure or federal tax treatment
of the transactions, and each party hereto (and any employee, representative,
or agent of any party hereto) may disclose to any and all persons, without
limitation of any kind, the federal tax structure and federal tax treatment of
the transactions.  The preceding
sentence is intended to cause the transactions to be treated as not having been
offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with such purpose.  In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to the federal tax structure of
the transactions or any federal tax matter or federal tax idea related to the
transactions.

18.12.          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.”

18.13.          Survival.  Article XVII and Article XVIII shall survive
the termination of this Agreement.

 

 

15

 

IN WITNESS WHEREOF, the
Company and the Administrator have executed this Agreement as of the date first
above written.

	
   

  	
  FIRST
  COLONY LIFE INSURANCE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  UNION
  FIDELITY LIFE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

16

 

BUSINESS ASSOCIATE ADDENDUM

 

I.              Purpose.  

In order to disclose certain
information to the party providing a service under this Agreement (“Provider”)
under this Addendum, some of which may constitute Protected Health Information
(defined below), the party to whom a service under this Agreement is being
provided (“Recipient”) and Provider mutually agree 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 to the extent that Provider is considered a “Business Associate” under
the HIPAA Privacy Rule and all references in this section to Business
Associates shall refer to Provider. 
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 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 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 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 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 

 

2

 

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.

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 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 

 

3

 

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 request make
available to Recipient, its Subsidiary, or, at Recipient’s or such Subsidiary’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 and that is
in Business Associate’s custody or control, so that Recipient or its Subsidiary
may meet its access obligations under 45 Code of Federal Regulations
§ 164.524.

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

C.    Disclosure
Accounting.  So that Recipient or its Subsidiaries 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 Recipient or the relevant Subsidiary 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 

 

4

 

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 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 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 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.

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.

 

5

 

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.

 

6

 

 

SCHEDULE C

 

CEDING
COMMISSION

 

The Ceding Commission shall
be the sum of the following:

1.                                       an amount equal
to the excess of the Total SAP Ceded Reserves over Total GAAP Ceded Reserves
measured as of the close of business on the day immediately preceding the
Inception Date (which amount may be negative);

2.                                       an amount equal
to the unamortized PVFP intangible asset balance of the Company (excluding any
related mark to market adjustments for SFAS 115 requirement) with respect to
the Reinsured Contracts as measured as of the close of business on the day
immediately preceding the Inception Date, determined in accordance with GAAP;

3.                                       an amount equal
to the unamortized deferred acquisition costs of the Company (excluding any
related mark to market adjustments for SFAS 115 requirement) with respect to
the Reinsured Contracts as measured as of the close of business on the day
immediately preceding the Inception Date, determined in accordance with GAAP;
and

4.                                       an amount equal
to the excess of the GAAP book value of the Assets (excluding any related mark
to market adjustments for SFAS 115 requirement) over the SAP book value of the
Assets measured as of the close of business on the day immediately preceding
the Inception Date (which amount may be negative).

 

 

SCHEDULE D

 

ASSETS

	
   

  	
   

  	
  Transfer
  Document

  	
   

  	
  From

  	
   

  	
  To

  	
   

  	
  Nature of
  Transfer

  	
   

  	
  Cash Map
  Cross-Reference

  	
   

  	
  Schedule

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FCL SSA Coinsurance

  	
   

  	
  FCL

  	
   

  	
  UFLIC

  	
   

  	
  Treaty

  	
   

  	
  (84)

  	
   

  	
  Schedule D

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Called
  Securities*

  	
   

  	
  Parent
  Name

  	
   

  	
  Issuer
  Name

  	
   

  	
  1Q04 Cusip
  1Q04 Tax lot

  	
   

  	
  12/31/03
  Local Par

  	
   

  	
  12/31/03
  GAAP BV (incl attached derivative)

  	
   

  	
  12/31/03
  Accrued Interest

  	
   

  	
  12/31/03
  GAAP BV+Accrued Interest

  	
   

  	
  12/31/03
  STAT BV (incl attached derivative)

  	
   

  	
  12/31/03
  Accrued Interest

  	
   

  	
  12/31/03
  STAT BV+ Accrued Interest

  	
   

  	
   

  
	
  [Individual
  Asset Details Omitted]

  
	
   

  	
   

  	
  Asset Sub
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  6,168,100,894.73

  	
   

  	
  102,337,873.54

  	
   

  	
  6,270,438,768.27

  	
   

  	
  6,069,445,083.68

  	
   

  	
  102,337,873.54

  	
   

  	
  6,171,782,957.22

  	
   

  	
   

  
	
   

  	
   

  	
  Cash

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  11,006,434.84

  	
   

  	
   

  	
   

  	
  11,006,434.84

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  6,080,451,518.52

  	
   

  	
   

  	
   

  	
  6,182,789,392.06

  	
   

  	
   

  

* These Securities will not be
transferred. The "Call Amount" will be settled in cash.

 

SCHEDULE E

 

EXPENSE
ALLOWANCES

The “Annual Expense
Reimbursement Factor” used to calculate the Expense Allowance is as follows:

Policy Maintenance Factor                $23.84 per Policy

Such Annual Expense
Reimbursement Factor 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 Factor prepared in
accordance with the methodology set forth below (the “Annual Expense
Reimbursement Factor 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, the
Company shall cause to be prepared and delivered to the Reinsurer the Triennial
Study which sets forth the Annual Expense Reimbursement Factor 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 Factor 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, the Company shall cause to be prepared and
delivered to the Reinsurer the Annual Expense Reimbursement Factor Report,
together with all supporting data used in preparing the Annual Expense
Reimbursement Factor Report and work papers, in reasonable detail, setting
forth the determination of such Annual Expense Reimbursement Factor for the
next calendar year (such documents, together with the Annual Expense
Reimbursement Factor Report, the “Annual Expense Reimbursement Factor
Documents”).

 

(c) Methodology.  At the time of the Triennial Study,
historical costs (to include costs directly related to maintaining and
administering policies, processing claims and reporting results) will be
determined for the Policy Maintenance Factor identified above.  For a given Annual Expense Reimbursement
Factor the identified costs will be divided by the total historical number of
units of measure for both the Reinsured Contracts and the retained block of
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 two succeeding years in the period between the Triennial Studies the
historical dollar amounts by Policy Maintenance Factor will be adjusted (rolled
forward) for current year cost changes agreed to by the Reinsurer and the
Company (in accordance with the procedures set forth below).  This rolled forward historical cost will
then be divided by the total historical number of units for the current period
to determine a prospective cost per unit for the next calendar year.

An
additional adjustment, positive or negative, to the prospective cost per unit
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 which was not included in the prior
Triennial Study or the succeeding roll forward.

The
combined prospective unit cost and additional adjustment is the Annual Expense
Reimbursement Factor. The Expense Allowance will be determined quarterly and
billed to the Reinsurer in three equal installments during the quarter at the
end of the month.  Each installment will
be determined by multiplying the actual number of units at the beginning of the
quarter covered by this Agreement times the Annual Expense Reimbursement Factor
(divided by twelve).

(d) Review of Documents.  Following the delivery of the Annual Expense
Reimbursement Factor Documents or the Triennial Study Documents, as applicable,
the Company shall (i) provide to the Reinsurer or its designated representative
copies of such additional work papers and other documents relating to its
preparation of the Annual Expense Reimbursement Factor Report or Triennial
Study, as applicable, as the Reinsurer 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 Reinsurer and the Reinsurer’s designated representative for the purpose of
providing such other information as the Reinsurer or the Reinsurer’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 Factor.

(e) Notice of
Disagreement.  In the event that the
Reinsurer has any disagreement with any of the Annual Expense Reimbursement
Factor Documents or the Triennial Study Documents, as applicable, the Reinsurer
shall give written notice of all such disagreements (a “Notice of
Disagreement”) to the Company within thirty (30) days after the Annual Expense
Reimbursement Factor Documents or the Triennial Study Documents, as applicable,
are delivered to the Reinsurer.  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 Factor, as
proposed by the Company as a result of such items in disagreement.

(f) Dispute Resolution.  If the Reinsurer does not deliver a Notice
of Disagreement to the Company within such thirty (30) day period, the Annual
Expense Reimbursement Factor Documents and the Triennial Study Documents, as
applicable, shall be final and binding upon 

 

2

 

the parties hereto and shall
constitute the final calculation of the Annual Expense Reimbursement Factor for
the next calendar year.  If the
Reinsurer delivers a Notice of Disagreement to the Company 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 Factor, if any, that are agreed to by the
Company and the Reinsurer within sixty (60) days of the aforementioned delivery
of the Annual Expense Reimbursement Factor Documents or the Triennial Study
Documents, as applicable, shall be incorporated into a final calculation of the
Annual Expense Reimbursement Factor.  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 Factor 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 the Reinsurer.  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 the Reinsurer a definitive calculation
of the Annual Expense Reimbursement Factor, which shall be final and binding
upon the parties hereto and shall be so reflected in the calculation of the
Annual Expense Reimbursement Factor. 
The Company and the Reinsurer shall each pay one-half of the fees and
expenses of the Accounting Firm.

(g) Expense Allowance
Pending Resolution.  In the event of
a dispute with respect to any Annual Expense Reimbursement Factor for the next
succeeding Calendar year, the Company and the Reinsurer agree that the Annual
Expense Reimbursement Factor 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.

 

 

3

 

 

SCHEDULE F3⁄4PART I

INITIAL REPORT

 

	
  1.

  	
   

  	
  Total SAP Ceded Reserves 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gross Policy Reserves calculated in accordance with SAP with respect
  to the reinsured risks.

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Ceding Commission:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Excess SAP Ceded Reserves over GAAP Ceded Reserves:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1) Total SAP Ceded Reserves

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  2) Total GAAP Ceded Reserves: 

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gross
  Policy Reserves calculated in accordance with GAAP with respect to the
  reinsured risks.

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Excess SAP Reserves over GAAP Reserves (A1-A2)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Present Value of Future Profits (PVFP)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Deferred Acquisition Costs (DAC)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
  Asset Book Value Difference —Measured as of close of business the day
  preceding the Inception Date

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  1) Asset Book Value (GAAP basis)

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  2) Asset Book Value (SAP basis)

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Excess Asset Book Value (D1-D2)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Total Ceding Commission (A+B+C+D)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Accrued Interest on Assets as of the day before Inception Date

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Investment Cash Flows on the Assets from the Inception Date through
  the Closing Date

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Net Due Reinsurer (1-2—3+4)

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

 

SCHEDULE F3⁄4PART II

QUARTERLY REPORT

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Benefits

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Withdrawals from Claims Settlement Account

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Expense Allowance

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  I.

  	
  Quarterly Settlement Amount (—1+2-3)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
  Net Due to (from) Reinsurer

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

SCHEDULE
F3⁄4PART III

ANNUAL REPORT

	
  1.

  	
   

  	
  Benefits

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Withdrawals from Claims Settlement Account

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Expense Allowance

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  I.

  	
  Quarterly Settlement Amount (-1+2-3)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
  Net Due to (from) Reinsurer (I-II)

  	
   

  	
  $

  	
   

  

 

 

SCHEDULE
G

FORM OF TRUST
AGREEMENT

 

 

SCHEDULE
H

ELIGIBLE SECURITIES

 

Assets of the types for
which an Illinois-domiciled life insurance company could obtain full statutory
reserve credit under statutory accounting practices prescribed or permitted by
the Director of Insurance of the State of Illinois.Exhibit
10.55

 

 

This LIABILITY AND PORTFOLIO MANAGEMENT AGREEMENT,
dated as of January 1, 2004 (this “Agreement”), between TRINITY PLUS
FUNDING COMPANY, LLC, a New York limited liability company (the “Company”)
and GENWORTH FINANCIAL ASSET MANAGEMENT, LLC, a Virginia limited liability
company (the “Manager” and together with the Company, the “Parties”).

 

W  I
T  N  E  S  S  E  T  H:

 

WHEREAS, FGIC MRCA Corp. (“MRCA Corp.”) and the
Company entered into that certain Investment Administration Agreement, dated as
of June 23, 1997 (as subsequently amended, the “Investment Administration
Agreement”); and

 

WHEREAS, the Manager is an investment adviser
registered with the United States Securities and Exchange Commission that will
be engaged by the Company to provide the services described herein; and

 

WHEREAS, MRCA Corp. has provided the Company a written
notice of resignation pursuant to Section 3.05 of the Investment Administration
Agreement and the Company, by executing this Agreement, accepts such
resignation and waives the requirement for sixty (60) days’ notice thereof; and

 

WHEREAS,  the Investment Administration Agreement
will be terminated and replaced by this Agreement; and

 

WHEREAS, the Manager and the Company wish to establish
and define certain obligations set forth in Exhibit C and Exhibit D
(the “Listed Obligations”) that the Manager is required to undertake in
connection with the services it will provide to the Company under this
Agreement;

 

NOW, THEREFORE, in consideration of the mutual
promises made herein and upon the terms and subject to the conditions set forth
herein, the Parties hereby agree as follows:

 

ARTICLE I

 

Definitions

 

SECTION 1.01.      Terms Defined in the Security Agreement.  Capitalized terms used in this Agreement
that are not defined herein shall have the respective meanings specified in the
Collateral Trust and Security Agreement, dated as of June 23, 1997, among the
Company, General Electric Capital Corporation (“GE Capital”), as LOC
Agent, and Bankers Trust Company (predecessor-in-interest to Deutsche Bank
Trust Company Americas), as Security Trustee (as amended, the “Security
Agreement”).

 

SECTION 1.02.      Terms Defined in this Agreement.  As used in this Agreement, the following
capitalized terms have the following meanings:

 

“Accounts” shall have the meaning specified in Section
2.01.

 

 

“Agreement” means this Liability and Portfolio
Management Agreement, including all provisions of the Security Agreement
incorporated by reference herein, which shall have the same effect as if those
provisions were set forth in full herein.

 

“Company” shall have the meaning specified in
the preamble of this Agreement.

 

“Cure Period” means (i) with respect to the
Listed Obligations set forth in Exhibit C, the respective cure periods
set forth therein, and (ii) with respect to Listed Obligations in Exhibit D
or other obligations set forth in this Agreement that do not appear in Exhibit
C, one hundred twenty (120) days during the initial term of this Agreement
and sixty (60) days thereafter; in each case such Cure Period to commence upon
receipt of notice by the Manager from any party to a Contract entitled to give
notice of default, GE Capital or the Company.

 

“Designee” shall have the meaning specified in Section
4.05(b).

 

“Dispute Resolution” shall have the meaning
specified in Section 4.05(b).

 

“Failure Notice Recipients” shall have the
meaning specified in Section 4.05(b) or such other recipients as are
designated from time to time.

 

“Final Cure Period” shall have the meaning
specified in Section 4.05(b).

 

“GE Capital” shall have the meaning specified
in Section 1.01.

 

“Impossibility” shall have the meaning
specified in Section 4.05(b).

 

“Indemnified Party” shall have the meaning
specified in Section 2.12.

 

“Investment Administration Agreement” shall
have the meaning specified in the first recital of this Agreement.

 

“Listed Obligations” shall have the meaning
specified in the fifth recital of this Agreement.

 

“Management Fee” shall have the meaning
specified in Section 2.06.

 

“Manager” shall have the meaning specified in
the preamble to this Agreement.

 

“Maximum Permitted Program Size” shall have the
meaning specified in Section 2.06.

 

“MCRA Corp.” shall have the meaning specified
in the first recital of this Agreement.

 

“Notice of Failure” shall have the meaning specified
in Section 4.05(b).

 

2

 

“Operating Costs” shall have the meaning
specified in Section 2.07(b).

 

“Operations, Procedures and Controls Manual”
means the Operations, Procedures and Controls Manual of the Company dated as of
July 2, 2003, as the same may be amended from time to time.  The Rating Agencies shall receive notice and
a copy of any amendments or modifications to the Operations, Procedures and
Controls Manual on a biennial basis.

 

“Parties” shall have the meaning specified in
the preamble to this Agreement.

 

“Permitted Investments Amendment” means an
amendment to the Security Agreement which allows the Company to purchase debt
issued by GE Capital without limit, subject to (i) the provision by GE Capital
of a full and irrevocable guarantee of the Company’s payment obligations under
the Contracts and Hedge Contracts, (ii) GE Capital’s being rated at least
“AAA”/”Aaa” by the Rating Agencies, and (iii) the retirement in full of the
outstanding Preferred Securities issued by the Company.

 

“Policy 5.0” means the policy which sets forth
certain risk management guidelines that the Company is required to observe, as
the same may be amended from time to time by the Company with the approval of
GE Capital.  The Rating Agencies shall
receive notice and copy of any amendments or modifications to Policy 5.0 on a
quarterly basis.

 

“Policy 6.0” means the policy which sets forth
certain risk management parameters that the Company is required to observe, as
the same may be amended from time to time by the Company with the approval of
GE Capital.  The Rating Agencies shall
receive notice and copy of any amendments or modifications to Policy 6.0 on a
quarterly basis.

 

“Portfolio” shall have the meaning specified in
Section 2.01.

 

“Remediation Plan” shall have the meaning
specified in Section 4.05(b).

 

“Security Agreement” shall have the meaning
specified in Section 1.01.

 

“Senior Management” shall have the meaning
specified in Section 4.05(b).

 

“Submission” shall have the meaning specified
in Section 4.05(b).

 

SECTION 1.03.      Other Definitional Provisions.  Section 1.02 of the Security Agreement is
incorporated herein by reference.

 

3

 

ARTICLE II

 

Engagement; Powers and Duties

 

SECTION 2.01.      Engagement of Manager.

 

(a)           The Company hereby retains the
Manager:

 

(i)            to advise the Company as to the
investment of its Assets, including recommending specific Permitted
Investments, Permitted Collateral Investments and Hedge Contracts to the
Company;

 

(ii)           to administer the Company’s Assets
maintained in the Facility Account, the Collateral Accounts, and the LOC
Reimbursement Account and such other accounts as the Company may maintain from
time to time (the “Accounts”), which are identified (to the extent
established by the effective date hereof) by account number in Exhibit A,
as the same may be amended from time to time, with such deposits thereto and
withdrawals therefrom as are from time to time permitted under the Security
Agreement;

 

(iii)          for as long as the revocable power of
attorney granted pursuant to Section 2.02 is in effect, to arrange the
purchase and sale through registered broker-dealers of bonds, pass-through
certificates, stocks, and other securities relating to the Accounts;

 

(iv)          for as long as the revocable power of
attorney granted pursuant to Section 2.02 is in effect, to arrange
the purchase and sale and otherwise to effect transactions in Hedge Contracts
relating to the Accounts;

 

(v)           to advise the Company in the issuance
of and to assist the Company in the preparation of (and, for so long as the
revocable power of attorney granted pursuant to Section 2.02 is in
effect, to execute and to deliver on behalf of the Company) Investment Orders
and Disposition Orders, as may be required from time to time pursuant to the
terms of Sections 2.04 and 2.05 of the Security Agreement;

 

(vi)          to prepare reports and to perform
valuation tests as specified in Section 2.06 of the Security Agreement;

 

(vii)         to take such action as is necessary and
proper on behalf of the Company for the preservation of Company Collateral
pursuant to Section 2.07 of the Security Agreement;

 

(viii)        to assist the Company in the preparation
and filing of financing statements or amendments of financing statements, as
may be required in connection with any change in the Company’s name or location
as contemplated by Section 2.08 of the Security Agreement;

 

(ix)           to advise the Company in the granting
or effecting of and to assist the Company in the preparation of (and, for so
long as the revocable power of attorney

 

4

 

granted pursuant to Section
2.02 is in effect, to execute and to deliver on behalf of the Company) any
consents, waivers, extensions, or modifications in respect of any item of
Company Collateral or Contract Collateral as contemplated by Section 2.10 of
the Security Agreement;

 

(x)            to advise the Company in the
delivery of and to assist the Company in the preparation of (and, for so long
as the revocable power of attorney granted pursuant to Section 2.02 is
in effect, to execute and to deliver on behalf of the Company) any instrument
of transfer or release in respect of any item of Company Collateral or Contract
Collateral as contemplated by Section 2.11 of the Security Agreement;

 

(xi)           to notify the Security Trustee and
other specified parties as may be required from time to time, pursuant to the
terms of the Security Agreement, of a Credit Event or a Program Event of
Default;

 

(xii)          to advise the Company as to the
allocation of Company Collateral to particular Contracts pursuant to Article V
of the Security Agreement and the terms of the relevant Contract;

 

(xiii)         to notify the Security Trustee as may
be required from time to time, pursuant to the terms of the Security Agreement,
of an LOC Draw Event;

 

(xiv)        to designate persons who are registered
representatives of a registered broker-dealer which is a member of the National
Association of Securities Dealers to execute and deliver Contracts on behalf of
the Company in their capacity as such pursuant to a power of attorney granted
by the Company from time to time to registered representatives designated and
notified to the Company by the Manager from time to time;

 

(xv)         to engage a registered broker-dealer
which is a member of the National Association of Securities Dealers to assist
the Company in connection with the offering, issuance and sale of Contracts
and, in connection therewith, to make such other arrangements with such
broker-dealer as may be necessary or advisable to ensure that such
broker-dealer supervises its registered representatives who will effect such
transactions and takes responsibility for such offering, issuance and sale; and

 

(xvi)        to take any other action deemed
necessary or advisable to write 
Contracts on behalf of the Company, subject to the limitations set forth
in the Security Agreement.

 

The Manager shall administer all of the Company’s
Assets in the Accounts (all of such Assets together, the “Portfolio”) in
accordance with the terms and conditions and shall otherwise observe in all
material respects the requirements of the Security Agreement and other Program
Documents, the Operations, Procedures and Controls Manual, Policy 5.0 and

 

5

 

Policy 6.0, this Agreement and all other documents,
policies, laws and regulations applicable to the Company from time to
time.  The Company shall provide copies
of the Security Agreement, the Operations, Procedures and Controls Manual,
Policy 5.0 and Policy 6.0 to the Manager no later than the time that this
Agreement is entered into and shall provide copies of all amendments,
supplements and revisions to such documents as soon as they are available to
the Company.

 

(b)           Performance.  The Parties hereby agree that the Manager
shall perform the specific Listed Obligations set forth in Exhibit C and
Exhibit D during the term of this Agreement and, subject to Section
2.10, such other functions as are set forth in this Agreement or as are
generally required to operate the business of the Company in accordance with
applicable laws, regulations, documents and Company policy.  The Manager acknowledges that it will take
all reasonable steps to continue to conduct the business of the Company in a
manner substantially similar to that in which it had been conducted prior to
the Parties’ entry into this Agreement and in a manner reasonably satisfactory
to the Company.  The Manager shall
perform its duties pursuant to this Agreement (i) exercising the same diligence
and care applied to manage its own property; (ii) consistent with the practices
used by it (and its Affiliates) to manage portfolios of similar assets for
other customers and (iii) consistent with the diligence and care applied by
other professional managers of similar stature.  Notwithstanding the foregoing, if the Company does not consent,
affirmatively or otherwise, to any proposed action by the Manager pursuant to
this Section 2.01(b), the Manager’s failure to take such proposed action
shall not be deemed a breach of its standard of care hereunder.

 

SECTION 2.02.      Power of Attorney.  The Company hereby provides the Manager with
a revocable power of attorney with full power and authority:

 

(i)            to evaluate and appraise the
Portfolio;

 

(ii)           to arrange the purchase and sale
through registered broker-dealers of bonds, pass-through certificates, stocks,
and other securities in connection with making Investments for the Portfolio;

 

(iii)          to arrange the purchase and sale and
otherwise to effect transactions in Hedge Contracts in connection with making
Investments for the Portfolio through registered broker-dealers;

 

(iv)          to execute and to deliver on behalf of
the Company any Investment Orders and Disposition Orders, as may be required
from time to time pursuant to the terms of Section 2.04 and 2.05 of the
Security Agreement;

 

(v)           to execute and to deliver on behalf
of the Company any consents, waivers, extensions, or modifications in respect
of any item of Company Collateral or Contract Collateral as contemplated by
Section 2.10 of the Security Agreement;

 

(vi)          to execute and to deliver on behalf of
the Company any instrument of transfer or release in respect of any item of
Company Collateral or Contract Collateral;

 

(vii)         to engage a broker-dealer acceptable to
the Company to assist the Company in the origination, issuance and sale of
Contracts in accordance with all applicable securities laws and regulations;
and

 

6

 

(viii)        subject to the limitations set forth in
the Operations, Procedures and Controls Manual, Policy 5.0 and Policy 6.0, to
take any other action, including executing agreements and any other documents
on behalf of the Company that the Manager deems necessary or advisable to
purchase, sell, or otherwise effect investment transactions relating to the
Portfolio.

 

All Investments made, and transactions entered into,
by the Manager on behalf of the Company shall be entered into in the name of
the Company.  All actions contemplated
above shall be performed in accordance with applicable laws, regulations,
documents and applicable Company policy. 
The Manager shall not be under an obligation to keep the Portfolio fully
invested if, in its sole discretion, it shall determine that market and/or
economic conditions make it imprudent or disadvantageous to do so at any time
or funds should be made available for distributions and other payments pursuant
to the Security Agreement.  The Company
represents that it has the authority to make the appointment set forth in this
paragraph.  In the event the Manager
fails to perform a Listed Obligation and this Agreement is terminated pursuant
to Section 4.05(a) or (b), or if this Agreement is terminated
pursuant to Sections 4.05(c) or (d), this power of attorney may
be revoked by the Company by written notice to the Manager.

 

SECTION 2.03.      Valuation.  The Manager shall value the Portfolio from
time to time as required by Section 2.06 of the Security Agreement in order to
prepare the reports required thereunder, using the portfolio valuation methods
set forth in the Market Valuation Addendum attached as Schedule 1.01 to the
Security Agreement, in order to determine whether a Coverage Shortfall, a
Program Shortfall or a Net Worth Deficit has occurred and is continuing and
whether the Market Sensitivity Limit has been exceeded.  The Manager shall also value Permitted
Collateral Investments on deposit in Collateral Accounts as required under the
terms of each Collateralized Contract.

 

SECTION 2.04.      Reports.  As more particularly specified in the applicable Program
Documents and in Exhibit C and Exhibit D, the Manager shall:

 

(a)           prepare the Company’s annual
financial statements and, unless otherwise specified by the Company, arrange to
have such statements audited by a firm of independent accountants acceptable to
the Company and GE Capital;

 

(b)           timely prepare and provide to the
Security Trustee, the Company and the Rating Agencies such reports as are
required to be provided to each of such Persons pursuant to Section 2.06 of the
Security Agreement and in accordance with Exhibit 2.06 of the Security
Agreement;

 

(c)           give prompt written notice to the
Company, the Security Trustee, the Broker-Dealers and the Rating Agencies of
(i) the existence of a Coverage Shortfall, Program Shortfall, or Net Worth
Deficit or (ii) the exceeding of a Market Sensitivity Limit; and

 

7

 

(d)           notify the Company and GE Capital
immediately upon learning of any Credit Event, Program Event of Default or
other material default or breach of the Listed Obligations set forth in Exhibit
C.

 

SECTION 2.05.      Confidential Relationships.  All information and recommendations
furnished by the Manager to the Company shall be treated by the Company as
confidential.  The Manager shall, in
turn, treat as confidential all information concerning the affairs of the
Company.  Nothing in this Section
2.05 shall be deemed to preclude any such information or recommendations
from being disclosed by either Party to such Party’s Affiliates or to the
directors, officers, employees, representatives, agents, or advisers of such
Affiliates , or pursuant to applicable law, regulation or court order; provided,
that any such recipients are advised of the confidential nature of such
information or recommendations.

 

SECTION 2.06.      Fees.  The Company hereby agrees to pay to the Manager a fee (the “Management
Fee”) at an annual rate of sixteen and one-half (16.5) basis points
(0.165%) of the Maximum Permitted Program Size of the Company as of the date
hereof, payable quarterly in arrears; provided, however, that the
Management Fee shall be pro rated to the date of termination in the event the
Agreement is terminated pursuant to Article IV.  For the purposes hereof, “Maximum
Permitted Program Size” means nine billion dollars ($9,000,000,000) or such
larger amount as shall be approved in writing by GE Capital.  In no event shall the Management Fee that is
payable to the Manager be an amount less than fourteen million, eight hundred
fifty thousand dollars ($14,850,000) per annum, pro rated to reflect the period
of time during which this Agreement was in effect during each year.

 

SECTION 2.07.      Expenses Reimbursed.

 

(a)           The Company shall reimburse the
Manager for all out-of-pocket expenses incurred and approved pursuant to Section
2.09(e) in connection with the performance of its duties hereunder, except
for any expenses arising out of the Manager’s willful misfeasance, bad faith,
gross negligence in the performance of or reckless disregard of its obligations
and duties hereunder.

 

(b)           The Company shall reimburse the
Manager for all appropriate Operating Costs of the Company.  Such reimbursement shall be made, upon
receipt by the Company from the Manager of a schedule detailing Operating Costs
(substantially in the form of Exhibit B hereof),  within thirty (30) days following
the end of each quarter.  For the
purposes hereof, “Operating Costs” means all costs incurred by the
Manager in connection with the performance of its obligations under this
Agreement that have been submitted and approved in writing as part of the
annual budget approval process described in Section 2.09(e).  For the avoidance of doubt, it is hereby
agreed that certain expenses will not be paid by the Manager and do not
constitute reimbursable Operating Costs. 
Such expenses, which are directly attributable to the Company, include
fees payable to: (i) each rating agency that assigns a rating to the
Company, (ii) external auditors of the Company, (iii) external legal counsel
engaged by the Company for services rendered thereto and not in connection with
duties of the Manager which are

 

8

 

unrelated to the
management services it renders to the Company, (iv) certain third-party
providers of accounting services to the Company, (v) providers of credit
research services required by the Company and (vi) any provider of goods or
services for costs incurred in connection with requirements imposed by
regulatory authorities, the applicable rating agencies, or any applicable law,
rule, regulation, administrative interpretation, ordinance, code issued by a
Governmental Authority or regulatory body, or any order, writ, injunction,
directive, judgment or decree of a court of competent jurisdiction; each such
expense shall be paid by the Company.

 

SECTION 2.08.      Execution of Securities Transactions.

 

(a)           In connection with the offering and
sale of Contracts, the Manager shall engage a registered broker-dealer approved
by the Company that provides services with respect to the origination, issuance
and sale of Contracts that the Manager believes to be of value.  The Company shall pay all costs associated
with the retention of such broker-dealer.

 

(b)           Except as otherwise specifically
directed by the Company, the Manager shall have complete discretion to select
any registered broker-dealer in all securities transactions affecting the
Portfolio not described in Section 2.08(a).  The Manager is expressly authorized to select such
brokers-dealers who provide brokerage and research services that the Manager
believes to be of value.  The Manager is
expressly authorized to pay from the Assets in the Portfolio commissions on
such transactions in amounts that the Manager determines in good faith to be
reasonable in relation to the value of such brokerage and research services,
viewed in terms either of the particular transaction or the overall
responsibilities of the Manager with respect to the Portfolio.

 

SECTION 2.09.      Administrative Responsibilities.  The Manager shall have the following administrative
responsibilities:

 

(a)           The Manager shall submit the budget
for reimbursable Operating Costs to the Company and GE Capital by no later than
January 31 of each year and such budget shall be approved by the Manager of
Finance of Corporate Treasury and Global Funding Operations (or such other
representative as shall be designated from time to time in a notice to the
Manager executed by the Company and GE Capital) by February 15 of such
year.  Operating Costs incurred in
excess of the aggregate amounts approved in the annual budget must be
separately approved by the Company and GE Capital in order to be considered for
reimbursement.

 

(b)           Custody of the Assets comprising the
Portfolio will be maintained by the Security Trustee or the applicable Collateral
Agent as specified in Article II of the Security Agreement.  The Manager shall not have custody of any of
the Assets in the Portfolio.

 

(c)           The Manager shall keep such books and
records relating to all transactions that it effects pursuant to this Agreement,
including without limitation all books and records necessary (in addition to
books and records available from the Security

 

9

 

Trustee pursuant to Section
2.09(c) or otherwise) for preparing the reports required by Section 2.04.

 

(d)           The Manager on behalf of the Company
shall instruct the Security Trustee and each Collateral Agent:  (i) to send copies of all statements
relating to the Accounts to the Manager; (ii) to permit the Manager, on behalf
of the Company, to inspect the Company Collateral or Contract Collateral, as
the case may be, in the possession or otherwise under the control of the
Security Trustee and the books and records maintained by the Security Trustee
or such Collateral Agent, as the case may be, relating thereto (and to allow
the Manager to make extracts and copies thereof) as the Manager may reasonably
request pursuant to Section 2.03(b) of the Security Agreement; and (iii) to
report to the Manager, concurrently with reporting to the Company pursuant to
Section 2.03(a) of the Security Agreement, any failure on the part of the
Security Trustee or such Collateral Agent, as the case may be, to hold the
Company Collateral as provided in Section 2.03(a) of the Security Agreement.

 

(e)           For the avoidance of doubt, the
Manager shall provide no services to the Company in respect of tax planning or
tax compliance of any kind.

 

(f)            The Manager shall submit
presentations relating to the offering of Contracts to the Company and GE
Capital for approval prior to external use.

 

(g)           The Manager shall maintain its status
as an “investment adviser” under the Investment Advisers Act of 1940, as
amended, and shall follow all applicable laws and regulations relating to its
status as such and to its performance hereunder, including all applicable laws
and regulations relating to bidding for Contracts.

 

SECTION 2.10.      Other Duties as Reasonably Requested.  The Manager shall also perform such other
duties or shall modify existing duties as the Company may reasonably request or
that the Manager shall recommend to the Company from time to time relating to
the management of a business involved in the issuance of guaranteed investment
contracts and similar debt obligations issued by providers rated “AAA”/”Aaa” and
the management of the proceeds of the issuance of such contracts and
obligations.  If any additional or
modified duties are required of Manager under this Agreement, Manager shall
have the reasonable time and opportunity to procure such additional resources
as may, in Manager’s good faith judgment, be required to perform such
duties.  Manager also agrees that it
will cease to perform the requirements of certain obligations specified
hereunder if the Company so directs in writing.  Any such changes or additions shall be deemed for all purposes to
be amendments or supplements to this Agreement.  The Company shall pay such costs as have been mutually agreed to
by the Parties and as may from time to time be required to enable the Manager
to perform any additional or changed Listed Obligations contemplated herein and
other obligations not listed in this Agreement for which additional resources
are required or additional costs are reasonably incurred by the Manager.

 

SECTION 2.11.      Limitation of Liability.  Neither the Manager nor any of its
Affiliates nor any of their respective directors, officers, or employees shall
be liable to

 

10

 

the Company for any error
of judgment or mistake of law or for any loss arising out of any Investment,
Hedge Contract, or any other commitment of funds on behalf of the Company or
for any act or omission in the administration of the Portfolio except for
willful misfeasance, bad faith, gross negligence in the performance of or
reckless disregard of its obligations and duties hereunder, other than as may
be provided under applicable law.

 

SECTION 2.12.      Indemnification.  (a) The Company shall (i) indemnify and
hold harmless the Manager and any Affiliate of the Manager and each of their
respective directors, officers, employees and agents (each, an “Indemnified
Party”) from and against all losses, claims, damages, expenses or
liabilities to which such Indemnified Party may become subject (except in
respect of the broker-dealer engaged by the Manager in respect of the placement
of Contracts, which shall be the sole liability of the Manager), insofar as
such losses, claims, damages, expenses or liabilities (or actions, suits or
proceedings including any inquiry or investigation or claims in respect
thereof) arise out of, in any way relate to, or result from the transactions
contemplated by, this Agreement, and (ii) reimburse each of the Indemnified
Parties upon its demand for any reasonable legal or other expenses incurred in
connection with investigating, preparing to defend or defending any such loss,
claim, damage, liability, action or claim, in each case only to the extent that
funds are available therefor in accordance with the Security Agreement; provided,
however, that none of the Indemnified Parties shall have the right to be
so indemnified hereunder for losses, claims, damages, expenses or liabilities
to the extent resulting from its own negligence or willful misconduct or for
losses, claims, damages, expenses or liabilities that it is required to pay to
any broker-dealer that it has engaged in connection with the Contracts or other
liabilities.  If any action is brought
against an Indemnified Party indemnified or intended to be indemnified pursuant
to this Section 2.12, the Company shall, if requested by such
Indemnified Party, resist and defend such action, suit or proceeding or cause
the same to be resisted and defended by counsel reasonably satisfactory to such
Indemnified Party, but shall not be empowered to compromise or settle such action,
suit or proceeding unless such Indemnified Party has been fully indemnified for
any loss, claim, damage, expense or liability it thereby suffers.  Each Indemnified Party shall, unless the
Indemnified Party has made the request described in the preceding sentence and
such request has been complied with, have the right to employ its own counsel
to investigate and control the defense of any matter covered by such indemnity
and the reasonable fees and expenses of such counsel shall be at the expense of
the Company.  Any obligations of the
Company pursuant to this Section 2.12 are Deferred Expenses and the
Manager shall have recourse solely to the LOC Reimbursement Account for such
obligations of the Company (and not to any other assets of the Company) and shall
be paid in the priority specified in the applicable sections of Article VII of
the Security Agreement.  The Manager
hereby expressly consents to such limited recourse to the LOC Reimbursement
Account and to such priorities of distributions set forth in Article VII of the
Security Agreement.

 

11

 

ARTICLE III

 

Representations and
Warranties

 

SECTION 3.01.      Valid Existence; Authorization;
Enforceability.  Each of the Parties
represents and warrant to the other as follows:

 

(a)           such Party is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has all requisite power, legal right
and authority to execute and deliver this Agreement and all other documents to
be executed and delivered by such Party in connection herewith and to perform
its obligations hereunder and thereunder; and

 

(b)           this Agreement and all the documents
to be executed and delivered by such Party in connection herewith and therewith
has been duly authorized by all necessary actions on the part of such Party.

 

ARTICLE IV

 

Miscellaneous Provisions

 

SECTION 4.01.      No Assignment Without Consent.  This Agreement, and the obligations and
rights arising under this Agreement, may not be assigned or otherwise
transferred by either Party (including any assignment or transfer in connection
with any Person succeeding to any part of the business of either Party) without
the prior written consent of the other Party and without obtaining Rating
Agency Confirmation.

 

SECTION 4.02.      Counterparts.  This Agreement may be executed in one or
more counterparts and, as so executed, shall constitute one agreement binding
upon the Parties.

 

SECTION 4.03.      No Third Party Beneficiaries.  Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon any person (other
than the Parties and their permitted assigns), any right, remedy or claim by
reason of this Agreement or any term hereof, and all terms contained herein
shall be for the sole and exclusive benefit of the Parties and their successors
and permitted assigns.

 

SECTION 4.04.      Interpretation.  The headings of the Articles and Sections
hereof are for convenience of reference only and shall not affect the meaning
or construction of any provision hereof.

 

SECTION 4.05.      Term; Termination.

 

(a)           The Manager’s appointment hereunder
shall continue in effect for an initial term commencing on the date hereof and
ending on December 31, 2006, with extensions for additional one (1) year
periods commencing automatically upon each anniversary thereof, unless either
Party notifies the other Party in writing at least ninety (90) days before such
anniversary that such extension shall not be effective.

 

12

 

(b)           If the Manager fails to perform any
of its obligations set forth in this Agreement, Exhibit C or Exhibit
D, the Manager (or if the failure is first discovered by the Company, then
the Company) shall give prompt written notice (such notice, a “Notice of
Failure”) to the persons identified in Exhibit E (the “Failure
Notice Recipients”) specifying the nature of the failure; provided that in
the event the Manager fails to perform any of its obligations set forth in Exhibit
C, the Company shall give prompt written notice of such failure to the
Rating Agencies in addition to the Failure Notice Recipients.  In the event such Notice of Failure is
given, then either the Manager or the Company may elect to submit the matter for review (a
“Submission”) and resolution (“Dispute Resolution”),
which may include the establishment of a plan of remediation (a “Remediation
Plan”), to (i) with respect to the Manager, the Business Leader of the
Retirement Income and Investment Segment of Genworth Financial Inc. (or such
person or persons as such Business Leader may designate) and (ii) with respect
to the Company, the Senior Vice President – Corporate Treasury and Global
Funding Operation of GE Capital (or such person or persons as such Senior Vice
President may designate) ((i) and (ii) together, “Senior Management”).  The Manager and the Company agree (x) to
cooperate in good faith and in a reasonable manner to reach an agreement with
respect to any Remediation Plan; (y) to be bound by the results of any such
Dispute Resolution agreed to by Senior Management including any Remediation
Plan (the timing and content of which shall be at the sole discretion of Senior
Management) and (z) that the Manager will implement any such Remediation Plan
within the period mandated by Senior Management (the “Final Cure Period”).  The result of any such Dispute Resolution
shall be in writing signed by Senior Management, shall be deemed part of this
Agreement and, with respect to the failure involved, shall supersede any
conflicting or different terms of this Agreement.  The Chief Operating Officer of Manager’s Capital Markets Group
responsible for management of the Company or a person designated by such
officer (a “Designee”) shall provide to the Rating Agencies notice and a copy
of any Remediation Plan resulting from a Dispute Resolution that is deemed by
such officer or Designee to have a potential adverse effect on the ratings of
the Company.  The Manager shall identify
such officer or Designee in the appropriate periodic risk reports submitted to
the Rating Agencies.

 

If Senior Management fails to reach an agreement with
respect to a Dispute Resolution and the Cure Period has not expired, the matter
in dispute shall be resolved solely and exclusively in accordance with the
arbitration procedures set forth in Exhibit F.

 

If (i) Senior Management or an arbitral tribunal
described in Exhibit F fails to reach agreement with respect to a
Dispute Resolution and the Cure Period has expired or (ii) the Manager fails to
correct the failure by the end of the applicable Final Cure Period, then this
Agreement may, subject to Section 4.05(e), be terminated by the Company
upon two (2) Business Days’ prior written notice to the Manager and each
Failure Notice Recipient specifying the basis for and the effective date of the
termination.

 

Notwithstanding the foregoing, the payment obligations
of the Company during the initial term of this Agreement shall not be
terminated if any such failure and the continuation thereof are caused by Impossibility.  For the purposes hereof

 

13

 

“Impossibility” means loss or malfunction of
electric power, transportation or communication services; general inability to
obtain or retain labor, material, equipment or transportation, or a delay in
mails or services; the Company’s, GE Capital’s or their Affiliates’ (i) failure
to take an action on which the Manager’s performance of an obligation or any
Listed Obligation depends or (ii) taking an action which renders the Manager’s
performance of an obligation or any Listed Obligation impossible; governmental
or exchange action, statute, ordinance, ruling, regulation, administrative
interpretation or directive; acts of terror, vandalism, explosions, tornados,
acts of God or public enemy, acts of any civil or military authority,
revolutions, insurrections, strike, emergency, riots or civil commotions,
freezes, fires, floods, embargoes, wars, sabotage, explosions or other
unforeseen or unexpected occurrences, which unforeseen or unexpected
occurrences render the performance of any obligations by the Manager
impossible.  In the event of any such
occurrence, the Manager shall use all reasonable efforts to remediate the
disruption and resume its performance of the obligations.

 

(c)           The Company shall have the right, by
giving the Manager thirty (30) Business Days’ prior written notice, to
terminate this Agreement at an earlier time than that specified in Section 4.05(a)
in the event of continuing non-performance by the Manager due to Impossibility
of any obligation hereunder beyond the applicable Cure Period or Final Cure
Period, or if the Company liquidates all or substantially all of the Assets of
the Company held in the Facility Account (except Contract Collateral) and substitutes
therefor the debt of GE Capital pursuant to the terms of the Permitted
Investments Amendment.  Upon termination
of this Agreement pursuant to this Section 4.05(c), the Manager shall be
paid a termination fee by the Company equal to the product of (i) sixteen and
one-half (16.5) basis points (0.165%), multiplied by (ii) the Maximum Permitted
Program Size, multiplied by (iii) the percentage derived by dividing the number
of days remaining in the initial term by 365. 
In addition, the termination fee shall include any actual cost incurred
and agreed upon and reasonably associated with terminating the operations set
forth in this Agreement, including but not limited to employment severance
costs as determined by the standard practices of the Manager.

 

(d)           The Manager may resign upon not less
than ninety (90) days’ prior written notice to the Company.

 

(e)           Notwithstanding any provision to the
contrary, including the expiration of any term of this Agreement, so long as
the Portfolio is still outstanding, this Agreement shall remain in full force
and effect and no termination or resignation of the Manager shall be effective
until the Company has entered into an agreement with a successor manager.  Upon receiving a notice of resignation from
the Manager, the Company shall use its best efforts to enter into such an
agreement unless it elects to terminate this Agreement as provided in Section
4.05(c) above.  Except as set forth in Exhibit
F, nothing in this Agreement shall be deemed a waiver of any Party’s rights
to pursue remedies at law or in equity, which shall be available in accordance
with applicable law in addition to any remedies provided for in this Agreement.

 

SECTION 4.06.      Independent Contractor.    The Manager is being engaged pursuant to
this Agreement as an independent contractor and the Parties

 

14

 

expressly disclaim any
intention to enter into a joint venture, partnership, or any other form of
association pursuant to this Agreement.

 

SECTION 4.07.      GOVERNING LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE RULES OF CONFLICTS OF
LAWS OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION.

 

SECTION 4.08.      Notices.  All notices, instructions, and advice with respect to any
transactions or other matters contemplated by this Agreement shall be deemed
duly given only when actually received at such Party’s principal place of
business as set forth below.  Return
receipt or courier record of delivery shall be deemed conclusive evidence of
receipt.  Notices may be made by fax or
other electronic means shall be deemed given upon electronic evidence of
receipt at applicable recipient’s fax or computer station.  A copy of all notices given shall be
provided to GE Capital.

 

If to the Manager:

 

Genworth Financial Asset
Management, LLC

6620 West Broad Street

Richmond, Virginia  23230

Attention:  Pamela Schutz

Phone:  (804) 291-6533

Fax:  (804) 281-6165

E-mail:  pamela.schutz@ge.com

 

with a copy to:

 

335 Madison Avenue

Mezz4

New York, New York  10017

Attention:  Shailesh Shah

Phone:  (212) 389-2575

Fax:  (212) 389-2591

E-mail:  shailesh.shah@ge.com

 

If to the Company:

 

Trinity Plus Funding
Company, LLC

335 Madison Avenue

Mezz4

New York, New York  10017

Attention:  Shailesh Shah

Phone:  (212) 389-2575

Fax:  (212) 389-2591

E-mail:  shailesh.shah@ge.com

 

15

 

If to General Electric Capital Corporation:

 

General Electric Capital
Corporation

260 Long Ridge Road

Stamford, Connecticut  06927

Attention:  Senior Vice President – Corporate

Treasury and Global
Funding Corporation

Phone:  (203)
961-5077

Fax:  (203) 357-3490

E-mail:   alan.green1@ge.com

 

SECTION 4.09.      Entire Agreement; All Amendments in Writing.  (a)      This
Agreement embodies the entire understanding of the Parties concerning the
subject matter hereof and supersedes any and all other previous agreements,
written or oral, concerning the same subject matter.

 

(b)           The Parties may at any time and from
time to time, agree to any amendment or modification of, any provision of this
Agreement to cure any mistake, ambiguity, defect or inconsistency or to correct
any manifest error or to correct any error of formal, minor or technical
nature. The Rating Agencies shall be given written notice of any amendment
under this Section 4.09(b) not less than fifteen (15) days prior to
the effective date thereof.

 

(c)           The Parties may at any time and from
time to time, agree to any amendment or modification of, any provision of this
Agreement other than any amendment or modification provided for in Section
4.09(b); provided that, in each case, a Rating Agency Confirmation
shall be obtained prior to the effectiveness of such amendment or modification.

 

(d)           Any amendment to any provision of the
Security Agreement that is incorporated by reference in this Agreement
(including, without limitation, any amendment to any of the capitalized terms
incorporated by reference herein), so long as such amendment is made as permitted
under the terms of the Security Agreement, shall constitute an amendment to
this Agreement unless the Parties agree in writing that such amendment shall
not be effective under this Agreement.

 

SECTION 4.10.      Waiver.  No waiver of any provision of this Agreement nor consent to any
departure therefrom shall in any event be effective unless the same shall be in
writing and signed by the Party from whom such waiver or consent is sought, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. 
The Party seeking such waiver or consent shall promptly deliver a copy
thereof to the Rating Agencies.

 

SECTION 4.11.      Further Assurances.  Each Party hereby agrees to execute and
deliver such additional documents, instruments or agreements as may be
reasonably necessary and appropriate to effectuate the purposes of this
Agreement.

 

16

 

SECTION 4.12.      Successors and Assigns.  This Agreement shall be binding upon the
Parties and their respective successors and assigns.

 

SECTION 4.13.      Severability.  Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.

 

SECTION 4.14.      Limited Recourse.  The obligations of the Company under this
Agreement are solely the obligations of the Company.  No recourse shall be had for any obligation or claim arising out
of or based upon this Agreement against any Member, manager, officer organizer,
agent or employee of the Company or any shareholder, officer, director,
employee, agent or incorporator of any Member. 
Any accrued obligations owing by the Company shall be payable by the
Company solely to the extent that funds are available therefor form time to
time in accordance with the provisions of Article VII of the Security Agreement
(and such accrued obligations shall not be extinguished until paid in full.)

 

SECTION 4.15.      Termination of the Investment
Administration Agreement; Release. 
Effective as of the date hereof, the Company does hereby, for itself and
its successors and assigns, waive the sixty (60) days’ notice requirement of Section 3.05
of the Investment Administration Agreement and accepts the resignation of MRCA
Corp. as the Portfolio Adviser thereunder and fully and unconditionally release
and forever discharge MRCA Corp. (and any officer, director, employee or agent
of MRCA Corp.) from any and all present and future (i) obligations and
liabilities under the Investment Administration Agreement and (ii) causes of
action, suits, claims, demands, liabilities and obligations whatsoever, whether
at law or in equity, arising from or related to the Investment Administration
Agreement, arising from and after the date hereof.

 

[Signature Page Follows]

 

17

 

IN WITNESS WHEREOF, the Parties have executed this
Agreement as of the date first above written.

 

	
   

  	
  TRINITY PLUS FUNDING COMPANY, LLC,

  
	
   

  	
    a
  New York limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  IC FUNDING CORP.,

  
	
   

  	
   

  	
  a Delaware corporation,

  
	
   

  	
   

  	
  as its Controlling Common
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENWORTH FINANCIAL
  ASSET MANAGEMENT, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND

  	
   

  
	
  CONSENTED TO BY:

  	
   

  
	
   

  	
   

  
	
  FGIC MRCA CORP.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGREED AND ACCEPTED BY:

  	
   

  
	
   

  	
   

  
	
  GENERAL ELECTRIC CAPITAL

  	
   

  
	
  CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
								

 

18

 

Exhibit
A

 

Accounts
Comprising the Portfolio

 

 

	
  Account

  	
   

  	
  Custodian Bank

  	
   

  	
  Account Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Facility Account

  	
   

  	
  Deutsche Bank
  Trust

  Company Americas,

  New York, NY

  	
   

  	
  23398

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LOC Reimbursement Account

  	
   

  	
  Deutsche Bank
  Trust

  Company Americas,

  New York, NY

  	
   

  	
  23405

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
                          Account

  	
   

  	
  Deutsche Bank
  Trust

  Company Americas,

  New York, NY

  	
   

  	
   

  

 

A-1

 

Exhibit B

 

Form of Schedule of Operating Costs

 

Operating Costs for the
first calendar year, commencing on January 1, 2004, shall be
$[                    ]
and thereafter shall be equal to [   ]% of the Operating Costs
of the Manager, subject to the Company’s approval, as provided in Section 2.07(b)
and shall consist of the following (allocated [   ]% with
respect to the Company):

 

	
   

  	
   

  	
  2004

  	
   

  	
  2004

  	
   

  
	
  CMS

  	
   

  	
  1Q

  	
   

  	
  2Q

  	
   

  	
  3Q

  	
   

  	
  4Q

  	
   

  	
  TY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Comp & Benefits:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salaries

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Savings
  Plan 401k

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bonuses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Employee
  Insurance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Payroll
  Taxes

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Comp & Benefits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchase Base:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Travel
  & Living Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Business
  Meetings

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Education

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Employment
  Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tuition
  Reimbursement

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Relocation
  Maintenance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dues
  & Associations

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Consulting
  Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outside
  Services

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rent/
  Utilities

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Legal
  Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Audit
  Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Recreation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone/Cellular

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Printing
  & Office Supplies

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Postage\Courier
  Service

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subscriptions

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Information
  Services

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Advertising
  / Marketing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Temporary
  Help

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equipment
  Maintenance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardware
  Expense

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Software
  Expense

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fiscal
  Agent Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Investment
  Fees

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Organizational
  Misc

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Purchase Base

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Controllable

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

B-1

 

	
   

  	
   

  	
  2004

  	
   

  	
  2004

  	
   

  
	
  CMS

  	
   

  	
  1Q

  	
   

  	
  2Q

  	
   

  	
  3Q

  	
   

  	
  4Q

  	
   

  	
  TY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property
  Insurance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Corporate
  Assessments

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Other

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SG&A Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rating
  Agency Fee

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss
  On Other Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Insurance
  And Licensing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  State
  And Local Taxes

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Goodwill
  Amortization

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Change
  in DAC

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ceding
  Commission

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-SG&A Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Op & Admin Expense

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Depreciation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Direct Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Broker
  Fees Amortization

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Expenses (including Broker Fees)

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  

 

B-2

 

Exhibit
C

 

Priority Manager Functions

 

	
  Listed Obligation

  	
   

  	
  Cure
  Period

  
	
   

  	
   

  	
   

  
	
  Payments

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Manager shall cause
  payments to be made as required under any Contracts, Hedge Contracts or other
  agreement to which the Company is a party.

  	
   

  	
  Five (5) Business Days
  from the date a notice of nonpayment received by Manager under the applicable
  Contract, Hedge Contract or agreement (or such shorter period as exists prior
  to such nonpayment being an actionable default thereunder); provided, however,
  that if the Manager or the Company gives notice to the other party requesting
  Dispute Resolution within one (1) Business Day of notice, the cure period
  hereunder shall be extended by three (3) Business Days from the date the
  notice of nonpayment is received (it being understood that in no event shall
  this section supersede the contractual payment obligations in the
  respective Contracts or Hedge Contracts).

  
	
   

  	
   

  	
   

  
	
  Risk Matters

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Manager shall comply
  with all requirements of GE Capital’s Policy 5.0 and 6.0 relating to the
  Company and related “strike zones,” as such policies and strike zones are
  amended from time to time, and all requirements relating to Permitted
  Investments and the portfolio in the Security Agreement; provided,
  that in the event that a trigger has been tripped under Policy 6.0 by virtue
  of a change in the market or pursuant to the action of a rating agency, GE
  Capital shall provide direction on remediation on a case-by-case basis if not
  otherwise provided for in Policy 6.0 and, if the Manager takes the
  appropriate corrective action (whether as prescribed by the Policy or as
  directed by GE Capital), no failure to perform an obligation under this
  Agreement shall be deemed to have occurred.

  	
   

  	
  Five (5) Business Days.

  
	
   

  	
   

  	
   

  
	
  Rating
  Agency Requirements

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Manager shall prepare
  all reports on the dates specified by each rating agency currently rating
  obligations of the Company and shall meet all requirements specified by any
  such agency for continuation or reinstatement of their highest long-term and
  short-term ratings.

  	
   

  	
  Thirty (30) days or
  such shorter or longer period as is specified for compliance by the rating
  agencies.

  

 

C-1

 

	
  Listed Obligation

  	
   

  	
  Cure
  Period

  
	
   

  	
   

  	
   

  
	
  Financial
  Reporting

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Manager shall comply
  with Section 2.04 hereof and the Listed Obligations and shall
  prepare all reports relating to the Company as are necessary or desirable for
  compliance with the Sarbanes-Oxley Act of 2002 and any other financial
  reporting requirements of the Company under applicable law and external
  regulation.

  	
   

  	
  Thirty (30) days or
  such shorter or longer period as is specified by the applicable accounting
  firm or regulatory body to allow for compliance with the applicable
  regulatory or disclosure requirement.

  
	
   

  	
   

  	
   

  
	
  Legal Compliance

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Manager shall prepare
  disclosure documentation annually or more frequently as is necessary or
  desirable in connection with its offering of Contracts and Preferred
  Securities and shall otherwise comply with the requirements of contracts to
  which it is a party, and all applicable laws and regulations.

  	
   

  	
  Thirty (30) days or
  such other period as is specified in the applicable agreement or regulation
  or as is directed by the applicable regulatory body.

  

 

C-2

 

Exhibit
D

 

Listed Obligations

 

Business

 

•                                          Manager
will use its best efforts to maintain an Average Program Size of thirteen
billion dollars ($13,000,000,000) or such other amount reasonably specified by
the Company from time to time for the combined portfolios of the Company and
Trinity Funding Company, LLC.  For the
purposes hereof, the term “Average” means a rolling 3-month average of
end-of-day balances, computed daily.

 

•                                          Manager
will review the Portfolio Quality Review with GE Capital on a monthly basis on
such dates as Manager and GE Capital shall agree to in advance.

 

Compliance/Legal

 

•                                          Manager
will maintain the corporate and limited liability company minutebooks and
records of the Company and its non-controlling common members and any
successors thereto, and take all actions required to maintain their valid
existence and good standing in the jurisdictions in which they are organized or
qualified.

 

•                                          Manager
will comply with applicable law in respect of the Company’s issuance of
Contracts and Preferred Securities, including with respect to rules promulgated
under federal securities laws that restrict certain forms of advertising and
solicitation.

 

•                                          Manager
will prepare updated versions of the Confidential Information Memorandum of the
Company (i) on an annual basis to reflect then-current audited financial
information of the Company or (ii) at such other times as may be required by
the Company.

 

•                                          Manager
will, as required from time to time, prepare updated versions of the Private
Placement Memorandum of the Company relating to the Company’s issuance of
Preferred Securities.

 

•                                          Manager
will use its best efforts to take all actions required in connection with
obtaining the appropriate authority with respect to the extension of the
Liquidity Commitment and/or the Letter of Credit commitment and any required
increase of the Liquidity Commitment and/or the Letter of Credit commitment (it
being understood that no failure to perform a Listed Obligation shall be deemed
to have occurred if either such commitment is not extended or increased after a
request has been submitted).

 

•                                          Manager
will consult with and obtain approval from the Company in connection with
proposed material modifications to the terms or the form of Contracts.

 

D-1

 

•                                          Manager
will maintain its status as an “investment adviser” under the Investment
Advisers Act of 1940, as amended, and will take all reasonable steps to comply
with all applicable laws and regulations relating to its status as such.

 

•                                          Manager
will cause its legal staff to draft and prepare all Contracts, Hedge Contracts
and other contracts entered into by the Company.  The in-house counsel of Manager may, to the extent required,
engage outside counsel in connection with the preparation of such contracts if
such engagement is approved verbally or in writing by the General Counsel –
Treasury Operation of GE Capital and otherwise approved under Section 2.09.  Nothing in this Agreement will preclude Manager
from engaging its own outside counsel for any purpose it deems necessary or
advisable, and Manager need not obtain any separate approval therefor.

 

•                                          Manager
will comply with all applicable laws and all applicable policies and procedures
as the same may be provided to Manager by the Company, including but not
limited to the USA Patriot Act and Anti-Money Laundering policies and laws.

 

•                                          Manager
will take all reasonable actions required to assist the Company or GE Capital
in connection with changes to the corporate structure of the Company and its
common members.

 

•                                          Manager
will take all reasonable steps to provide prompt responses to GE Capital in
connection with requests from regulatory or other governmental authorities for
documentation or data relating to the operation of the Company.

 

•                                          Manager
will comply with all applicable laws, regulations, policies, management
procedures and other requirements of the Company, GE Capital and Genworth,
including but not limited to the GE Capital Information Security Procedure and,
to the extent applicable, the policies contained in “Integrity:  The Spirit and the Letter of Our
Commitment.”

 

Liability/Contract
Bidding Process

 

•                                          Manager
shall ensure that transactions in Contracts are effected in accordance with the
following general procedure: (i) a registered representative of a broker-dealer
(each, a “GIC Salesperson”) shall receive bid specifications (“Bid
Specs”) provided by prospective Contract customers or their agents (“Customers”);
(ii) the GIC Salesperson shall analyze the Bid Specs and respond to Customers,
indicating to such Customers, where appropriate, the requirements to maintain
the Company’s exemption from registration under the Investment Company Act of
1940, as amended; (iii) the GIC Salesperson shall submit all Bid Specs for
review and comment to the designated member of the Manager’s legal staff and
will note on any bid acceptance form that is delivered to the Customer all
appropriate

 

D-2

 

comments received
from the legal staff; (iv) the GIC Salesperson shall price transactions in
which the Company has an interest in bidding and communicate such pricing to
the applicable Customer; and (v) the Manager’s legal staff shall provide
counsel to the GIC Salesperson in connection with the preparation, negotiation
and closing of all Contracts for transactions that the Company wins.

 

Financial Controls

 

•                                          Manager
will perform its accounting responsibilities in compliance with GE Capital’s
internal accounting policies and U.S. GAAP.

 

•                                          Manager
will maintain accounting polices currently in place and all changes to
accounting policies must be approved in advance by GE Capital.  For new accounting standards, GE Capital
will provide Manager with the accounting policy to be adopted by the Company.

 

•                                          Manager
will perform accounting in accordance with FAS 133 and obtain approval from GE
Capital for the following FAS 133 activities:

 

•                  Changes
to existing hedge documentation

•                  Changes
in existing methodology used to assess and measure hedge effectiveness

•                  Application
of  “fair value” hedging as defined in
FAS 133

•                  Economic
hedges that do not qualify for FAS 133 hedge treatment

 

•                                          Manager
will provide a monthly variance analysis of:

 

•                  Changes
in the fair market value of derivatives

•                  Hedge
ineffectiveness

•                  Amounts
excluded from the measure of effectiveness

 

•                                          Manager
will reconcile all general ledger accounts in accordance with GE Capital’s
account reconciliation criteria. 
Manager will provide a quarterly dashboard of account reconciliations
and open items (in an agreed upon format) on dates to be provided to Manager.

 

•                                          Manager
is responsible for establishing and maintaining a system of internal controls
adequate to ensure that Assets are appropriately safeguarded and that the
financial statements and related disclosures and schedules fairly present the
financial condition of the Company.

 

•                                          Manager
and GE Capital will agree upon and execute a plan to minimize profit and loss
volatility associated with FAS 133.

 

D-3

 

•                                          Manager
will deliver monthly unaudited financial results including any adjustments to
the monthly financials to be included in the next month’s accounting
period.  These financials should include
an explanation of significant items of variance to the Operating Plan.  Such financial statements will be delivered
within fifteen 15 days of the close as defined by GE Capital.

 

•                                          Manager
will deliver quarterly unaudited financial reports and schedules in accordance with
GE Capital’s closing instructions.  Such
financials statement will include variance and profitability analysis suitable
for the closing of the books.  Closing
instruction to be provided by the 15th of the month of the quarterly close.

 

•                                          Manager
will provide the Company with financial projections in accordance with GE
Capital’s SI, SII and OP process.  GE
Capital will provide the Manager with SI, SII and OP timing and assumptions
where needed to make such forecasts.

 

•                                          Manager
will deliver annual audited financial statements (balance sheet and income
statement) upon completion of the annual audit by GE Capital’s external
auditors.

 

•                                          Manager
will conduct annual reviews in compliance with applicable provisions of the
Sarbanes-Oxley Act of 2002, in a manner acceptable to GE Capital.

 

•                                          Manager
will report detailed profit and loss results and details of expenses within
fifteen (15) days following the end of each quarterly period, including
comparisons of actual versus plan, in a format reasonably agreeable to both
parties.  Profit and loss reports will
be included in the monthly Portfolio Quality Review, substantially in the
format attached as Schedule I to this Exhibit D.

 

Risk

 

•                                          Manager
will comply with the Permitted Investments guidelines provided in Schedule 4.01(h)
of the Security Agreement.

 

•                                          Manager
will value the Portfolio from time to time, as required by Section 2.06 of
the Security Agreement in order to prepare the reports required by such
Section of the Security Agreement, using the portfolio valuation methods
set forth in the Market Valuation Addendum attached as Schedule 1.01 to
the Security Agreement, in order to determine whether a Coverage Shortfall, a
Program Shortfall or a Net Worth Deficit has occurred and is continuing and
whether the Market Sensitivity Limit has been exceeded.  The Manager shall also value Permitted
Collateral investments on deposit in Collateral Accounts as required under the
terms of each Collateralized Contract.

 

•                                          Manager
will comply with all applicable terms set forth in Policy 5.0 and Policy 6.0
and all “strike zones” defined by GE Capital with respect to assets,
liabilities

 

D-4

 

and derivatives
(as each may be amended from time to time by GE Capital).  Manager will deliver the following reports
on a monthly basis for monitoring such compliance:

 

•                  Portfolio
Quality Review

•                  Credit
Limit Watch

•                  Credit
Risk Rating

•                  Stop
Loss

•                  Month
End Credit

•                  Counterparty
Exposure

 

•                                          Except
as otherwise specified in this Exhibit D, Manager will deliver risk
reports to GE Capital on a monthly basis and will include, at a minimum, the
following:

 

•                  Portfolio
Quality Review

•                  Supplemental
Program Shortfall

•                  Liquidity
Report (provided on a daily basis)

•                  Summary
Hedge Analysis Report (provided on a daily basis)

•                  REM
(electronic submission)

 

•                                          Manager
will provide other available reports required from time to time by GE Capital
as they are requested.

 

•                                          Manager
will participate, on a monthly and quarterly basis, in in-force reviews with
Genworth senior management and GE Capital senior management.

 

•                                          Manager
will from time to time provide GE Capital with data feeds relating to the
Portfolio, the content, format and timing of the delivery of which feeds will
be agreed upon by Manager and GE Capital.

 

•                                          Manager
will (i) comply with applicable requirements as to hedge counterparty ratings,
as set forth in the Security Agreement and as provided in the applicable
policies of GE Capital, (ii) comply with the applicable requirements to provide
information to GE Capital with respect to hedge counterparty exposure, (iii)
deliver a Counterparty Exposure report for monitoring such compliance and (iv)
comply with such restrictions as to hedge counterparty that may from time to
time be imposed by GE Capital.

 

•                                          Manager
will from time to time provide GE Capital with such available additional risk
analyses as GE Capital may request, including but not limited to, stress tests
and value at risk analyses.  In each
case, the content, format and timing of the delivery of such analyses will be
agreed upon, prior to delivery, by GE Capital and Manager.

 

D-5

 

•                                          Manager
will comply with all applicable requirements relating to the Company’s
maintenance of the “AAA”/”Aaa”  ratings
assigned thereto by the applicable rating agencies.

 

Customer

 

•                                          Manager
will ensure delivery by mail or e-mail, or will make available on the Company’s
website, to the Company’s customers in accordance with such customers’
respective Contracts, Customer Statements in respect of customers’ investments
with the Company.

 

•                                          Manager
will ensure the timely remittance of payments required under each Contract or
other agreement of the Company.

 

•                                          When
requested by the Company and GE Capital, Manager will deliver to the Company
and GE Capital customer service metrics (e.g., call volume by customer
complaint type by date) and deal closing customer survey results (if and to the
extent the same is provided by customers).

 

Information Technology

 

•                                          Manager
will maintain the current systems environment to fully support the business
requirements and the services to be performed under this Agreement for the
Company.

 

Continuous Service
(Disaster Recovery)

 

A disaster recovery site
shall be maintained as follows:

 

•                                          Backup
copies of critical servers shall be maintained at an off-premises Disaster
Recovery Site (locations to be determined from time to time by the Parties
hereto).  The critical servers are as
follows: Principia PAS server, Oracle Data Warehouse Server,  File Server, Oracle GL Server, and FileNET
CM Server.   In the event of a major
disaster where access to production servers and 335 Madison Avenue’s assets (or
those of a successor location from which the Company’s business is operated) is
lost,  service will be restored on the
following schedule: PAS and Oracle Data warehouse systems will be within
twenty-four (24) hours.  GL and FileNET
server will be available within forty-eight (48) hours.  The Parties will work with GE Capital
Treasury on a best effort basis to establish and implement an adequate Disaster
Recovery plan.

 

D-6

 

•                                          Software
refreshes to synchronize the DR systems with the production systems shall be
done within twenty-four (24) hours of the update of the production system to
coincide with production system updates.

 

•                                          Backups
of the production PAS database shall be copied to the DR PAS server nightly.

 

Data Management (Backups
and Retention)

 

•                                          Full
data backups are performed daily on all production and Quality Assurance
systems.

 

•                                          Full
data backups of all Network files are performed daily.

 

•                                          Backup
tapes shall be stored offsite at Iron Mountain.  Tapes are picked up by 10:30 a.m. daily.

 

•                                          An
authorized list of personnel may recall tapes from Iron Mountain (an agreement
exists to deliver backup tapes to any location, including the home of IT
personnel).

 

•                                          Tapes
shall be cycled on a rolling eight (8) week rotation.  All Financial close and Month End tapes shall be marked permanent
and retained indefinitely.

 

Change Management:  Notification and Approval Process on 

Changes to IT Infrastructure and Application Software

 

•                                          GE
Capital Treasury shall have the right to approve the Company’s Change
Management Process.

 

•                                          All
change requests shall be reported to GE Capital Treasury on a weekly basis.

 

•                                          Emergency
changes to the IT Environment shall be reported to GE Capital Treasury as they
occur.

 

•                                          In
the event of a major System Failure GE Capital Treasury shall be notified and
required to approve required changes.

 

Performance and Capacity
Planning Reporting and Reviews

 

•                                          In
general, monthly business reports shall be available by 9:00 a.m. the last
Business Day of the month.  The IT team
will communicate all exceptions by

 

D-7

 

8:30 a.m. on the
day such exceptions occur.  The
communication will include the anticipated delivery time.  The following performance tracking processes
exist:

 

•                  Monthly
report of nightly batch completion times.

•                  Monthly
report of nightly batch completion times.

•                  Monthly
report of exceptions and violations of the 9:00 a.m. report delivery times and
cures employed.

•                  Monthly
report on system loading and projected performance bottlenecks and issues and
resolutions.

•                  Monthly
report of license denials.

 

•                                          GE
Capital Treasury shall perform a quarterly review of systems and access rights
to those systems.  IT shall prepare the
report to be reviewed, deliver a copy to GE Capital Treasury and will remediate
issues discovered.  An updated access
matrix will be added to the “CMS Operational Procedures and Controls” document
quarterly.

 

Personnel

 

•                                          Manager
will maintain a staff of qualified employees sufficient to support the business
requirements of the Company and to perform the services required under this
Agreement.

 

Other Obligations

 

•                                          Manager
will comply in all material respects with all other obligations provided under
this Agreement.

 

D-8

 

Schedule I

 

Format of P&L Included with

Monthly Portfolio Quality Review

 

	
  CMS P&L ($ millions)

  	
   

  	
  Actual

  	
   

  	
  Operating
  Plan

  	
   

  	
  Variance
  from

  Operating Plan

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Revenue:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trinity
  Gross Spread Income

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Trinity
  Broker Fees Amortization

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trinity
  Hedge Ineffectiveness

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trinity Net Interest Margin

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trinity
  Realized Gains (Losses)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subtotal Trinity Net Revenue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GE
  Book

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total CMS Net Revenue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Expenses:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CMSI

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
  Trinity

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MRCA

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Operating Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total CMS Pre-tax Income

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax (Benefit)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Income

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Trinity
  Average Liability Balance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Core
  Spread (including Broker Fees)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Spread (Including Hedge Ineffectiveness)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Memo:
  Net Income Sharing

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Genworth
  (Management Fee + GE Book)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GEI
  Other

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

D-9

 

Exhibit
E

 

Failure Notice Recipients

 

 

	
  Recipient

  	
   

  	
  Address

  	
   

  	
  Telephone

  	
   

  	
  Facsimile

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Manager

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pamela Schutz

  	
   

  	
  6610 West Broad Street

  Richmond, Virginia 23230

  	
   

  	
  (804) 281-6533

  	
   

  	
  (804) 281-6165

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kelly Groh

  	
   

  	
  6610 West Broad Street

  Richmond, Virginia 23230

  	
   

  	
  (804) 281-6321

  	
   

  	
  (804) 281-6310

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Toni Ness

  	
   

  	
  6610 West Broad Street

  Richmond, Virginia 23230

  	
   

  	
  (804) 289-3594

  	
   

  	
  (804) 281-6005

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shailesh Shah

  	
   

  	
  335 Madison Avenue

  Mezz4

  New York, New York 10017

  	
   

  	
  (212) 389-2575

  	
   

  	
  (212) 839-2591

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Grant Lineberry

  	
   

  	
  335 Madison Avenue

  Mezz4

  New York, New York 10017

  	
   

  	
  (212) 389-2570

  	
   

  	
  (212) 389-2591

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Colin Burrell

  	
   

  	
  335 Madison Avenue

  Mezz4

  New York, New York 10017

  	
   

  	
  (212) 389-2640

  	
   

  	
  (212) 389-2590

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Company

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kathy Cassidy

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6199

  	
   

  	
  (203) 585-1191

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brian Wenzel

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6774

  	
   

  	
  (203) 316-7601

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Alan Green

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 961-5077

  	
   

  	
  (203) 357-3490

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Johan Fogelberg

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6072

  	
   

  	
  (203) 357-4975

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert Ceske

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 602-8337

  	
   

  	
  (203) 585-1361

  

 

E-1

 

	
  General Electric
  Capital Corporation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kathy Cassidy

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6199

  	
   

  	
  (203) 585-1191

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brian Wenzel

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6774

  	
   

  	
  (203) 316-7601

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Alan Green

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 961-5077

  	
   

  	
  (203) 357-3490

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Johan Fogelberg

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 357-6072

  	
   

  	
  (203) 357-4975

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert Ceske

  	
   

  	
  201 High Ridge Road

  Stamford, Connecticut 06927

  	
   

  	
  (203) 602-8337

  	
   

  	
  (203) 585-1361

  

 

E-2

 

Exhibit
F

 

Arbitration Procedures

 

If Senior Management
fails to reach agreement with respect to a Dispute Resolution within forty-five
(45) days of a Submission and the Cure Period has not expired, either Party may
submit the matter to be finally resolved by arbitration pursuant to the CPR
Institute for Dispute Resolution (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 matters under dispute existing at the
time of the arbitration and for which arbitration is permitted.

 

The neutral organization
for purposes of the CPR Arbitration Rules will be the CPR.  The arbitral tribunal shall be composed of
three arbitrators, 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 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 matter
in dispute in accordance with the law of the State of New York, 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.

 

The Parties agree to be
bound by any award or order resulting from any arbitration conducted in
accordance with this provision and further agree that judgment on any award or
order resulting from an arbitration conducted under this provision may be
entered and enforced in any court having jurisdiction thereof.

 

Except as expressly
permitted by this Agreement, no Party will commence or voluntarily participate
in any court action or proceeding concerning a matter in dispute, except (i)
for enforcement, (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.

 

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.

 

Each
Party will bear its own attorneys’ fees and costs incurred in connection with
the resolution of any matter in dispute in accordance with this provision.

 

F-1

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