Exhibit
10.13
COINSURANCE AGREEMENT
between
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
and
UNION FIDELITY LIFE INSURANCE COMPANY
Dated as of April 15, 2004
TABLE OF
CONTENTS
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COINSURANCE AGREEMENT
This Coinsurance Agreement,
dated as of April 15, 2004 (this Agreement), is made and entered into by and
between General Electric Capital Assurance Company, an insurance company
organized under the laws of the State of Delaware (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 Persons
subsidiaries,
properties,
assets, or to such Persons 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.
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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
Reinsurers requirement to provide periodic certifications and reports
regarding the Reinsurers risk based capital ratio.
Reinsured Contracts
means the structured settlements immediate annuity contracts issued by the
Company and recorded in the Companys 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.
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Response shall have
the meaning specified in Section 13.2.
SAP means statutory
accounting practices prescribed or permitted by the Insurance Department of the
State of Delaware.
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 Companys 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
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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 Companys 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 Companys administrative
performance standards in effect on the date hereof, with such revisions
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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 Companys 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
Companys 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.
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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
partys 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 Companys 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
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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 Companys
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 Reinsurers 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 $26 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
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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 Reinsurers 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 Companys 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 Companys 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 Companys 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).
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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.
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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 Reinsurers 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.
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8.2. Reinsurers Liability. The Reinsurers liability with respect to the Reinsured Risks
will terminate on the earliest of:
(i) the date the Companys 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 Reinsurers 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 Reinsurers 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 Reinsurers 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 Companys 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 Reinsurers 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
Reinsurers 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
Reinsurers 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 Reinsurers 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
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
14
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 XI
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 Companys 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
mediators 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 partys
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 Delaware, 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 tribunals
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:
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If
to the Company:
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General
Electric Capital Assurance Company
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6610
West Broad Street
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Richmond,
VA 23230
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Facsimile: (804) 281-6165
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Attention: Executive Officer
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With
a copy to:
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General
Electric Capital Assurance Company
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6620
West Broad Street
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Richmond,
VA 23230
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Facsimile:
(804)
662-2414
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Attention: General Counsel
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If
to the Reinsurer:
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Union
Fidelity Life Insurance Company
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200
North Martingale Road
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Schaumburg,
IL 60173-2096
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Facsimile:
(847) 330-3404
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Attention:
Chief Financial Officer
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|
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With
a copy to:
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|
|
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Union
Fidelity Life Insurance Company
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200
North Martingale Road
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Schaumburg,
IL 60173-2096
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Facsimile: (847) 605-3044
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Attention: General Counsel
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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
Section 14.3 shall be construed to prohibit the Reinsurer from retroceding all
or any portion of the business reinsured hereunder.
18
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 State of
Delaware 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.
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
19
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.
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GENERAL
ELECTRIC CAPITAL ASSURANCE COMPANY
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By
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/s/ Victor
C. Moses
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Name:
Victor C. Moses
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Title:
Senior Vice President and Chief Actuary
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UNION
FIDELITY LIFE INSURANCE COMPANY
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By
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/s/ Glenn
Joppa
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Name:
Glenn Joppa
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Title:
Senior Vice President and Secretary
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21
SCHEDULE A
POLICY FORMS
8001
8101
8201
8401
1700
GECA RA&Q
SCHEDULE B
FORM OF ADMINISTRATIVE
SERVICES AGREEMENT
SSA UFLIC/GECA
ADMINISTRATIVE SERVICES AGREEMENT
by and between
GENERAL ELECTRIC CAPITAL ASSURANCE 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 GENERAL ELECTRIC CAPITAL
ASSURANCE COMPANY, an insurance company organized under the laws of the State
of Delaware (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 Authoritys 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 Authoritys 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
Companys 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 Companys
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
Companys 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
Companys 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 Administrators 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 Companys 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 Administrators 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 Administrators 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 Companys 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 Administrators 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 mediators 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 partys 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 the
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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 Delaware, 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 tribunals
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.
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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:
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If
to the Company:
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General
Electric Capital Assurance Company
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6610
West Broad Street
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Richmond,
VA 23230
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Facsimile: (804) 281-6165
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Attention: Executive Officer
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With
a copy to:
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General
Electric Capital Assurance Company
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6620
West Broad Street
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Richmond,
VA 23230
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Facsimile:
(804)
662-2414
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Attention: General Counsel
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If
to the Administrator:
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Union
Fidelity Life Insurance Company
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200
North Martingale Road
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Schaumburg,
IL 60173-2096
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Facsimile:
(847)
330-3404
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Attention: Chief Financial Officer
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With
a copy to:
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Union
Fidelity Life Insurance Company
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200
North Martingale Road
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Schaumburg,
IL 60173-2096
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Facsimile: (847) 605-3044
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Attention: General Counsel
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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 State of
Delaware 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.
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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.
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GENERAL
ELECTRIC CAPITAL ASSURANCE COMPANY
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By:
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Name:
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Title:
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UNION
FIDELITY LIFE INSURANCE COMPANY
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By:
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Name:
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Title:
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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, Recipients 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 Companys 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 Associates 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 Associates
proper management and administration; and (ii) as reasonably necessary to carry
out Business Associates 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 Associates 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 Recipients 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 Recipients 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 Recipients 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
Associates 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 Transactions
implementation specification or is not in the Standard Transactions
implementation specification; or
d. Changes the
meaning or intent of the Standard Transactions 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 Recipients or the relevant
Subsidiarys 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
3
or agent will comply with
the same restrictions and conditions that apply to the Business Associate under
the terms and conditions of this Addendum with respect to such PHI.
V. Protected Health Information Access,
Amendment and Disclosure Accounting.
A. Access. Business
Associate will promptly upon Recipients or its Subsidiarys request make available
to Recipient, its Subsidiary, or, at Recipients or such Subsidiarys
direction, to the individual (or the individuals 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 Associates 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 Recipients or its Subsidiarys 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 Recipients 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 Recipients 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 individuals
personal representative; (iii) to persons involved in that individuals 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 Recipients 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 Associates
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 Associates
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 Associates 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 Recipients request, access to Business Associates
internal practices, books, and records, as they relate to Business Associates
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 Recipients
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
|
|
GECA SS Coinsurance
|
|
GECA
|
|
UFLIC
|
|
Treaty
|
|
(90
|
)
|
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
|
|
|
|
|
|
|
|
|
|
4,066,936,562.98
|
|
63,939,042.73
|
|
4,130,875,605.71
|
|
4,064,372,934.13
|
|
63,939,042.73
|
|
4,128,311,976.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,381,001.99
|
|
|
|
8,381,001.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,072,753,936.12
|
|
|
|
4,136,692,978.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
* 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 Reinsurers designated representative for
the purpose of providing such other information as the Reinsurer or the
Reinsurers 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
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.
SCHEDULE FPART
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 (1-23+4)
|
|
$
|
SCHEDULE FPART
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 FPART 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.