Execution Copy
VA - GELAAC/UFLIC
================================================================================
REINSURANCE AGREEMENT
between
GE LIFE AND ANNUITY ASSURANCE COMPANY
and
UNION FIDELITY LIFE INSURANCE COMPANY
Dated as of April 15, 2004
================================================================================
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I DEFINITIONS................................................ 1
ARTICLE II COVERAGE................................................... 6
ARTICLE III ADMINISTRATION; GENERAL PROVISIONS......................... 7
ARTICLE IV GENERAL ACCOUNT ASSET TRANSFER; CEDING COMMISSION;
INITIAL MODCO RESERVE ADJUSTMENT........................... 11
ARTICLE V EXPENSE ALLOWANCES......................................... 12
ARTICLE VI ACCOUNTING AND SETTLEMENT; MODCO ADJUSTMENT................ 13
ARTICLE VII DURATION AND TERMINATION................................... 15
ARTICLE VIII INSOLVENCY................................................. 15
ARTICLE IX CREDIT FOR REINSURANCE..................................... 16
ARTICLE X REINSURANCE SECURITY....................................... 16
ARTICLE XI DEFERRED ACQUISITION COSTS................................. 18
ARTICLE XII DISPUTE RESOLUTION......................................... 19
ARTICLE XIII MISCELLANEOUS PROVISIONS................................... 21
SCHEDULES
---------
SCHEDULE A - POLICY FORMS
SCHEDULE B - SEPARATE ACCOUNTS
SCHEDULE C - FORM OF ADMINISTRATIVE SERVICES AGREEMENT
SCHEDULE D - CEDING COMMISSION
SCHEDULE E - ASSETS
SCHEDULE F - EXPENSE ALLOWANCES
SCHEDULE G - Part I - INITIAL REPORT
SCHEDULE G - Part II - DAILY SETTLEMENT REPORT
SCHEDULE G - Part III - MONTHLY SETTLEMENT REPORT
SCHEDULE G - Part IV - QUARTERLY SETTLEMENT REPORT
schedule G - Part V - ANNUAL REPORT
SCHEDULE H - FORM OF TRUST AGREEMENT
SCHEDULE I - ELIGIBLE SECURITIES
SCHEDULE J - COMMISSIONS
i
REINSURANCE AGREEMENT
---------------------
This Reinsurance Agreement, dated as of April 15, 2004 (this "Agreement"),
is made and entered into by and between GE Life and Annuity Assurance Company,
an insurance company organized under the laws of the Commonwealth of Virginia
(the "Company"), and Union Fidelity Life Insurance Company, an insurance company
organized under the laws of the State of Illinois (the "Reinsurer"). Defined
terms used herein are defined below.
The Company and the Reinsurer mutually agree to reinsure the risks
described in this Agreement under the terms and conditions stated herein. This
Agreement is an indemnity coinsurance and modified 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, Contractholder, 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):
"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 6.6.
"Applicable Law" means any federal, state, local or foreign law (including
common law), statute, ordinance, rule, regulation, order, writ, injunction,
judgment, permit, governmental agreement or decree applicable to a Person or any
of such Person's subsidiaries, properties, assets, or to such Person's officers,
directors, managing directors, employees or agents in their capacity as such.
"Assets" shall have the meaning specified in Section 4.4(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.
"Business Day" means any day other than a Saturday, Sunday or other day on
which the New York Stock Exchange is closed for trading.
"Capital Maintenance Agreement" means the Capital Maintenance Agreement
between General Electric Capital Corporation, a Delaware corporation, and the
Reinsurer.
"Ceded Reinsurance" means all reinsurance ceded by the Company pursuant to
contracts, binders, certificates, treaties or other evidence of reinsurance
relating to the Reinsured Risks in effect on or prior to the Inception Date,
except the reinsurance provided pursuant to this Agreement.
"Ceded Reinsurance Agreements" means all of the contracts, binders,
certificates, treaties or other evidence for Ceded Reinsurance.
"Ceding Commission" shall have the meaning specified in Section 4.2.
"Closing Date" means April 15, 2004.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commutation" means, with respect to any portion of the Ceded Reinsurance,
a commutation or other similar transaction that results in the termination of
such Ceded Reinsurance with respect to the Reinsured Contracts.
"Company Account" shall have the meaning specified in Section 10.1(e).
"Contractholder" shall mean the holder of any Reinsured Contract.
"CPR" shall have the meaning specified in Section 12.3.
"CPR Arbitration Rules" shall have the meaning specified in Section
12.4(a).
"Daily Settlement Account" shall have the meaning specified in Section
6.2(a).
"Daily Settlement Amount" means, with respect to a particular Business Day,
the results of the calculation set forth on Schedule G - Part II for such day.
"Daily Settlement Report" shall have the meaning specified in Section
6.2(b).
"Dispute" shall have the meaning specified in Section 12.1(a).
"Eligible Securities" shall have the meaning specified in Section 10.1(c).
"Expense Allowance" shall have the meaning specified in Section 5.1.
2
"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.
"Force Majeure" shall have the meaning specified in Section 3.10(b)(iii).
"Funding Requirement" shall have the meaning specified in Section 10.1(e).
"GAAP" means U.S. generally accepted accounting principles consistently
applied.
"General Account Liabilities" means all net retained general account
insurance liabilities and obligations arising under the Reinsured Contracts,
including, without limitation (i) benefits, surrender amounts and other amounts
payable to Contractholders under the terms of the Reinsured Contracts, (ii)
premium taxes due in respect of premiums and other consideration paid on or
after the Inception Date with respect to the Reinsured Contracts, (iii)
Insolvency Fund or other premium based assessments, net of any premium tax
credits of the Company arising out of any such assessments, based on premiums
and other consideration paid on or after the Inception Date with respect to the
Reinsured Contracts, (iv) all amounts payable on or after the Inception Date for
returns or refunds of premiums under the Reinsured Contracts, (v) all liability
for commission payments and other fees or compensation payable with respect to
the Reinsured Contracts in respect of premiums and other consideration paid on
or after the Inception Date and (vi) all Extra Contractual Liabilities resulting
from actions of the Company or its agents to the extent reinsurance of such
liabilities is permitted by state law; but in all cases excluding: (w) the
Separate Account Liabilities; (x) Post-Inception Date Extra Contractual
Liabilities; (y) any general account liabilities which relate to (A) amounts
transferred from the Separate Accounts to the general account of the Company
pending distribution to holders of the Reinsured Contracts, and (B) amounts held
in the general account of the Company pending transfer to the Separate Accounts;
and (z) compensation agreements, arrangements and practices (A) that exceed the
broker commission rates as shown for each product on Schedule J, (B) that exceed
the wholesale expense rates as shown for each product on Schedule J, (C) that
exceed the firm marketing related expense reimbursement rates as shown for each
firm on Schedule J, (D) that exceed the marketing allowance as shown on Schedule
J, or (E) that result from changes to compensation plans for any sales
organization on or after the Inception Date, unless otherwise agreed to in
writing by the Reinsurer or to the extent such excess costs are offset by an
increase in the fund company administrative expense service share referred to in
Schedule F.
"General Account Reserves" means the general account statutory reserves of
the Company (without regard to the transactions contemplated by this Agreement)
with respect to the General Account Liabilities determined pursuant to SAP, as
such reserves would have been
3
included in lines 1 and 13 of the Liabilities, Surplus and Other Funds page of
the NAIC Annual Statement Blank (2003 Format).
"Governmental Authority" means any foreign or national government, any
state or other political subdivision thereof or any self regulatory authority,
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(a).
"Initial MODCO Reserve Adjustment" means the amount specified in Section
4.3.
"Initial Notice" shall have the meaning specified in Section 12.2.
"Initial Reinsurance Premium" shall have the meaning specified in Section
4.1(a).
"Initial Report" shall have the meaning specified in Section 6.1.
"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.
"Monthly Accounting Period" means each calendar month, except that the last
Monthly Accounting Period shall be the period commencing with the first day of
the calendar month in which the Termination Date falls and ending with the
Termination Date.
"Monthly Settlement" shall have the meaning specified in Section 4.4(a).
"Monthly Settlement Report" shall have the meaning specified in Section
6.3.
"NAIC" means the National Association of Insurance Commissioners.
"Non-Guaranteed Elements" shall have the meaning specified in Section 3.3.
"Person" means any natural person, firm, limited liability company, general
partnership, limited partnership, joint venture, association, corporation,
trust, Governmental Authority or other entity.
"Post-Inception Date Extra Contractual Liabilities" means Extra Contractual
Liabilities attributable to the conduct of the Company on or after the Inception
Date in connection with the Company's administration of the Reinsured Contracts,
other than actions taken by the Company at the written request or direction of
the Reinsurer or in connection with the Company's marketing activities with
respect to the Reinsured Contracts.
4
"Quarterly Accounting Period" means each calendar quarter, except that the
last Quarterly 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.
"Quarterly Accounting Period MODCO Adjustment" shall have the meaning set
forth in Section 6.7.
"Quarterly Settlement" shall have the meaning specified in Section 4.4(a).
"Quarterly Settlement Report" shall have the meaning specified in Section
6.4.
"RBC Reporting Letter Agreement" means the letter agreement dated the date
hereof among the Company, the Reinsurer and certain affiliates of the Company
relating to the Reinsurer's requirement to provide periodic certifications and
reports regarding the Reinsurer's risk based capital ratio.
"Reinsurance Recoverables" means the amount of reinsurance recoverables
that are actually collected under Ceded Reinsurance.
"Reinsured Contracts" means the variable annuity contracts issued by the
Company and recorded in the Company's administration system on or prior to
December 4, 2003 and written on the policy forms described in Schedule A,
including any contract riders or endorsements issued with respect thereto after
the Inception Date with the prior written consent of the Reinsurer.
"Reinsured Risks" shall have the meaning specified in Section 2.1(a).
"Response" shall have the meaning specified in Section 12.2.
"SAP" means statutory accounting practices prescribed or permitted by the
Insurance Department of the Commonwealth of Virginia.
"Separate Account Charges" shall have the meaning specified in Section
4.1(b).
"Separate Account Liabilities" means those insurance liabilities that are
reflected in the Separate Accounts and that relate to the Reinsured Contracts,
including (i) amounts transferred from the Separate Accounts to the general
account of the Company pending distribution to holders of the Reinsured
Contracts, and (ii) amounts held in the general account of the Company pending
transfer to the Separate Accounts.
"Separate Account Reserves" means the separate account statutory reserves
of the Separate Accounts (without regard to the transactions contemplated by
this Agreement) with respect to the Reinsured Contracts determined pursuant to
SAP, as such reserves would have been included in line 27 of the Liabilities,
Surplus and Other Funds page of the NAIC Annual Statement Blank (2003 Format).
"Separate Accounts" means the separate accounts of the Company described on
Schedule B hereto.
5
"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 VII.
"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.
"Trust Account" shall have the meaning specified in Section 10.1(a).
"Trust Agreement" shall have the meaning specified in Section 10.1(a).
"Trustee" shall have the meaning specified in Section 10.1(a).
ARTICLE II
COVERAGE
--------
2.1. Coverage. (a) 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 (i) on a coinsurance basis, for
one hundred percent (100%) of the General Account Liabilities and (ii) on a
modified coinsurance basis, for 100% of the Separate Account Liabilities, in
each case, payable by the Company under the Reinsured Contracts on or after the
Inception Date (the "Reinsured Risks"). For the avoidance of doubt, the
Reinsurer shall assume the risk for all uncollectible or uncollected reinsurance
recoverables under the Ceded Reinsurance.
(b) Upon the annuitization of a Reinsured Contract, such Reinsured Contract
will be considered surrendered and the Reinsurer will pay to the Company an
amount equal to the general account value applied to the annuitization. In such
event, no further obligation or liability will exist for the Reinsurer with
respect to such annuitized Reinsured Contract.
2.2. Conditions. (a) If the Company's liability under any of the Reinsured
Contracts is changed because of changes made on or after the Inception Date in
the terms and conditions of the Reinsured Contracts (including to any contract
riders or endorsements thereto) that are required due to changes in Applicable
Law, the Reinsurer will share in the change proportionately to the coinsurance
share hereunder and the Company and the Reinsurer will make all appropriate
adjustments to amounts due each other under this Agreement.
(b) Except as otherwise set forth or contemplated herein, including in
paragraph (a) above, no changes, amendments or modifications made on or after
the Inception Date in the terms and conditions of the Reinsured Contracts
(including to any contract riders or endorsements thereto) which adversely
affect the liability of the Reinsurer hereunder shall be covered hereunder
without the prior written approval of such changes, amendments or
6
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 Reinsured Risks incurred by
the Company under such Reinsured Contract as if the non-approved changes,
amendments or modifications had not been made.
(c) The Company will not change fund options for the Separate Accounts from
and after the Inception Date unless such changes are made: (a) with the prior
written consent of the Reinsurer, in its sole discretion, (b) in fulfillment of
the fiduciary obligations of the Company after consultation with the Reinsurer
or (c) by the Board of Trustees of an unaffiliated fund (trust) to liquidate,
merge or remove a fund pursuant to the terms of the then existing fund
participation agreements or through a regulatory process.
2.3. Territory. The territorial limits of this Agreement shall be identical
with those of the Reinsured Contracts.
2.4. Commutation of Ceded Reinsurance. (a) The Company shall not, without
the Reinsurer's prior written approval in its sole discretion, take any action
to amend, waive or terminate, in whole or in part, any Ceded Reinsurance under
any Ceded Reinsurance Agreement or enter into any Commutation of Ceded
Reinsurance.
(b) 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 3.10, the Company
shall provide policyholder and claims servicing with respect to the Reinsured
Contracts and administer the Separate Accounts in accordance with the terms
hereof including, but not limited to, the collection of premiums and other
amounts due from Contractholders, the payment of all General Account Liabilities
and Separate Account Liabilities and the administration of claims and
disbursements, which disbursements shall be made (i) directly by the Company
with respect to such disbursements relating to the General Account Liabilities
and (ii) from the Separate Accounts with respect to such disbursements relating
to the Separate Account Liabilities. The Company shall provide policyholder and
claims servicing with respect to the Reinsured Contracts and administer the
Separate Accounts in good faith and with the care, skill, prudence and diligence
of a person experienced in administering variable annuity business. The Company
shall provide policyholder and claims servicing with respect to the Reinsured
Contracts and administer the Separate Accounts, (i) in accordance with the terms
of the Reinsured Contracts, (ii) in accordance with the applicable terms of this
Agreement, (iii) in compliance with Applicable Law and, subject to the
foregoing, (iv) in the same manner as it conducts its own business not subject
to this Agreement and (v) in accordance with the Company's administrative
performance standards in effect on the date hereof, with such revisions to such
standards as are
7
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 and the Separate Accounts.
(b) The Company may subcontract for the performance of any policyholder or
claims servicing service or services with respect to the Reinsured Contracts or
any services the Company is to provide in the administration of the Separate
Accounts 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 variable 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. Ceded Reinsurance Agreements. The Company shall manage and administer
the Ceded Reinsurance Agreements, including providing all reports and notices
required with regard to the Ceded Reinsurance Agreements to the reinsurers
within the time required by the applicable reinsurance agreement and doing all
other things necessary to comply with the terms and conditions of the Ceded
Reinsurance Agreements. Without limiting the foregoing, the Company shall timely
pay all reinsurance premiums due to reinsurers under the Ceded Reinsurance
Agreements and diligently collect from such reinsurers all reinsurance
recoverables due thereunder.
3.3. Non-Guaranteed Elements. The Company shall set all rider charges,
interest rates to be credited on the Reinsured Contracts and other
non-guaranteed elements of the Reinsured Contracts ("Non-Guaranteed Elements")
from and after the Inception Date. The Company shall allow the Reinsurer to
participate in all decisions made by the Company with respect to setting
Non-Guaranteed Elements.
3.4. Policy Exchanges. Unless otherwise agreed by the parties, the Company
will not make any targeted exchange offers with regards to the Reinsured
Contracts or otherwise target the Reinsured Contracts for replacement.
3.5. Claims Settlements. The Company agrees that it will provide prompt
notice to the Reinsurer of its intention to contest, compromise or litigate a
claim with respect to a Reinsured Contract, along with copies of all pleadings
and reports of investigation with respect thereto. The Reinsurer shall have the
right, at its own expense, to participate jointly with the Company in the
investigation, adjustment or defense of such claims. In addition, in the event
that litigation arises against the Company in connection with a claim which
seeks damages in excess of $1 million or other remedies deemed material to the
Reinsurer, the Reinsurer may, upon written notice to the Company, assume the
defense thereof with counsel selected by the Reinsurer and reasonably
satisfactory to the Company. If the Reinsurer assumes such defense, the Company
shall have the right, at its own expense, to participate jointly with the
Reinsurer in the defense thereof. If the Reinsurer assumes the defense of
litigation, the Reinsurer shall not settle such litigation without the Company's
prior written consent (which consent shall not be unreasonably withheld or
delayed) unless (i) there is no finding or admission of any violation of
8
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.
3.6. 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 Company's administration thereof in accordance with Applicable
Law and its record management practices in effect from time to time for the
Company's insurance business not covered by this Agreement. The Reinsurer and
its designated representatives may upon reasonable notice inspect, at the
offices of the Company where such records are located, the papers and any and
all other books or documents of the Company reasonably relating to this
Agreement, including the Reinsured Contracts and the administration thereof by
the Company (including compliance with the provisions of Section 3.1), and shall
have access to appropriate employees and representatives of the Company, in each
case during normal business hours for such period as this Agreement is in effect
or for as long thereafter as the Company seeks performance by the Reinsurer
pursuant to the terms of this Agreement or the Reinsurer reasonably needs access
to such records for regulatory, tax or similar purposes. The information
obtained shall be used only for purposes relating to the transactions
contemplated under this Agreement.
3.7. Errors and Omissions. If any delay, omission, error or failure to pay
amounts due or to perform any other act required by this Agreement is
unintentional and caused by misunderstanding or oversight, the Company and the
Reinsurer will adjust the situation to what it would have been had the
misunderstanding or oversight not occurred. The party first discovering such
misunderstanding or oversight, or an act resulting from such misunderstanding or
oversight, will notify the other party in writing promptly upon discovery
thereof, and the parties shall act to correct such misunderstanding or oversight
within twenty (20) Business Days of such other party's receipt of such notice.
However, this Section shall not be construed as a waiver by either party of its
right to enforce strictly the terms of this Agreement.
3.8. Age, Sex and Other Adjustments. If the Company's liability under any
of the Reinsured Contracts is changed because of a misstatement of age or sex or
any other material fact, the Reinsurer will share in the change proportionately
to the coinsurance share hereunder and the Company and the Reinsurer will make
all appropriate adjustments to amounts due each other under this Agreement.
3.9. 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.
3.10. 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)
9
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 3.10.
(b) In addition to the provisions of Section 3.10(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 proceedings
as set forth in Article XII 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 3.10(b)(iii) shall
relieve the Company from its administrative responsibilities
under this Agreement. For purposes of this Agreement "Force
Majeure" means any acts or omissions of any civil or military
authority, acts of God, acts or omissions of the Reinsurer,
fires, strikes or other labor disturbances, equipment failures,
fluctuations or non-availability of electrical power, heat,
light, air conditioning or telecommunications equipment, or any
other act, omission or occurrence beyond the Company's reasonable
control, irrespective of whether similar to the foregoing
enumerated acts, omissions or occurrences.
(c) The Company shall bear all transition costs associated with an
assumption of the administration of the Reinsured Contracts pursuant to Section
3.10(b).
(d) In the event of the Reinsurer's assumption of the administration of the
Reinsured Contracts, the Reinsurer and the Company shall enter into an
administrative services agreement in the form attached hereto as Schedule C and
the provisions of Section 2.1(b), Article V and Article VI shall become
inoperative.
(e) In the event that the Reinsurer is not properly licensed to administer
the Reinsured Contracts at the time of a proposed transfer of administration
under this Section 3.10, the Reinsurer may designate a properly licensed entity
that has appropriately trained and licensed personnel reasonably acceptable to
the Company to administer the Reinsured Contracts in its
10
stead, and the administrative services agreement referred to in paragraph (d)
above shall be executed by such properly licensed entity in lieu of the
Reinsurer. The designation and assumption of administration by such entity shall
not relieve the Reinsurer from any of its obligations or liabilities hereunder
(except as set forth in paragraph (d) above), and the Reinsurer shall remain
responsible for all obligations or liabilities of such entity with regards to
the providing of such administration as if provided by the Reinsurer. The
parties shall take all actions reasonably necessary to effect the prompt
transfer of administration provided in this Section 3.10.
(f) In the event of the assumption of the administration of the Reinsured
Contracts under this Section 3.10, the Reinsurer and the Company shall take all
actions necessary or appropriate to transfer administration of the Separate
Account Liabilities to the Reinsurer or its permitted designee. Such actions
shall include, without limitation, the establishment and maintenance of a new
separate account of the Company solely for the Reinsured Contracts and the
transfer of the assets of the Separate Account allocable to the Reinsured
Contracts to such new separate account.
ARTICLE IV
GENERAL ACCOUNT ASSET TRANSFER; CEDING COMMISSION; INITIAL MODCO
----------------------------------------------------------------
RESERVE ADJUSTMENT
------------------
4.1. Asset Transfer. (a) As consideration for the reinsurance by the
Reinsurer of the General Account Liabilities under this Agreement, on the
Closing Date, the Reinsurer shall be entitled to an amount equal to one hundred
percent (100%) of the General Account Reserves as of the close of business on
the day immediately preceding the Inception Date (the "Initial Reinsurance
Premium").
(b) As additional consideration for the Reinsurer entering into this
Agreement, the Reinsurer shall be entitled to 100% of all premiums and other
considerations to the extent received on or after the Inception Date by the
Company or the Reinsurer with respect to the General Account Liabilities, less
an amount equal to the reinsurance premium due under the Ceded Reinsurance
Agreements to the extent such premium relates to coverage on or after the
Inception Date with respect to the Reinsured Contracts. In addition, with
respect to the Separate Account Liabilities, the Reinsurer shall be entitled to
100% of all (i) mortality and expense risk charges and administrative expense
charges (collectively, "asset charges"), any rider charges (to the extent the
riders are reinsured hereunder), and contract maintenance charges, back-end
sales loads and other considerations billed separately for the Reinsured
Contracts collected by the Company on or after the Inception Date, and (ii) any
other charges, fees and similar amounts received by the Company from the
Separate Accounts on or after the Inception Date (collectively, the "Separate
Account Charges"). The Company hereby assigns to the Reinsurer all of its rights
to such premiums and other considerations payable to the Company. For the
avoidance of doubt, the Separate Account Charges shall not include any
distribution fees received from underlying mutual funds pursuant to a plan
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940.
11
4.2. 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 D.
4.3. Initial MODCO Reserve Adjustment. As additional consideration for the
reinsurance by the Reinsurer of the Separate Account Liabilities under this
Agreement, on the Closing Date, the Company shall transfer to the Reinsurer an
amount equal to the net of (a) minus (b) where (a) is an amount equal to the
Separate Account Liabilities as of the Inception Date and (b) is the Initial
MODCO Reserve Adjustment. The "Initial MODCO Reserve Adjustment" shall be an
amount equal to the Separate Account Liabilities as of the Inception Date.
4.4. Amounts Due the Parties. (a) Except as otherwise specifically provided
herein, all amounts due to be paid to the Company or the Reinsurer under this
Agreement shall be determined on a net basis, giving full effect to Section 3.9.
The net amount due the Reinsurer from the Company on the Closing Date under
Section 4.1(a) and Section 4.2 shall consist of (i) the investment assets (the
"Assets") set forth on Schedule E, 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 the Company or the Reinsurer with respect to each Monthly Accounting Period
ending after the Inception Date as reflected on a Monthly Settlement Report (the
"Monthly Settlement") shall be paid in cash by the owing party no later than
thirty (30) days after delivery of the Monthly Settlement Report. Each net
amount subsequently due the Company or the Reinsurer with respect to each
Quarterly Accounting Period ending after the Inception Date as reflected on a
Quarterly Settlement Report (the "Quarterly Settlement") shall be paid in cash
by the owing party no later than thirty (30) days after delivery of the
Quarterly Settlement Report. Each net amount subsequently due the Company or the
Reinsurer with respect to each calendar year ending after the Inception Date as
reflected on an Annual Report shall be paid in cash by the owing party 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 V
EXPENSE ALLOWANCES
------------------
5.1. Expense Allowance. As reimbursement for expenses incurred by the
Company in the providing of policyholder and claims servicing services with
respect to the
12
Reinsured Contracts, the Reinsurer shall pay to the Company with respect to each
Monthly Accounting Period ending after the Inception Date, an expense allowance
(each an "Expense Allowance") in an amount calculated in accordance with
Schedule F, as subsequently adjusted in accordance with the methodology and
procedures set forth on Schedule F; provided that if the amount calculated in
accordance with Schedule F with respect to any Monthly Accounting Period should
be negative, such negative amount shall be credited to the Reinsurer on the
Monthly Settlement Report for such period.
ARTICLE VI
ACCOUNTING AND SETTLEMENT; MODCO ADJUSTMENT
-------------------------------------------
6.1. Initial Report. A report shall be provided by the Company to the
Reinsurer on the Closing Date providing the data required in Schedule G - Part I
(the "Initial Report").
6.2. Daily Settlement Amounts. (a) On the Closing Date, the Reinsurer shall
establish a separate bank account (the "Daily Settlement Account") in its own
name for the payment of Daily Settlement Amounts and shall authorize at least
two signatories who shall be representatives of the Company and approved by the
Reinsurer to make deposits to, and withdrawals from, the Daily Settlement
Account.
(b) By 10:00 a.m. Eastern Time each Business Day following the Closing Date
during the term of this Agreement, the Company shall calculate the Daily
Settlement Amount for the prior Business Day. Promptly following such
calculation, the Company shall forward to the Reinsurer a report in the form of
Schedule G - Part II that shall provide the details of such calculation (the
"Daily Settlement Report"). Prior to 6:00 p.m. of such Business Day, the Company
or the Reinsurer, as appropriate, shall deposit into the Daily Settlement
Account an amount equal to such Daily Settlement Amount owed by such party to
the other. The party to whom such Daily Settlement Amount is owed shall have a
right to withdraw such deposited amount at any time following such deposit.
(c) The Company shall keep true and complete records, in accordance with
Applicable Law and its record management practices in effect from time to time
for the Company's insurance business not covered by this Agreement, clearly
recording the deposits in and withdrawals from the Daily Settlement Account. The
Company will make available to the Reinsurer or its designated representative,
or shall furnish to the Reinsurer or its designated representative, upon request
of the Reinsurer or its designated representative, copies of all such records.
All copies furnished in the ordinary course of business shall be furnished by
the Company at the Company's cost, which shall be included in the Expense
Allowance. Any extraordinary costs reasonably incurred by the Company in
response to requests from the Reinsurer shall be reimbursed by the Reinsurer.
(d) 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 Section 6.2.
13
(e) Upon a termination of this Agreement pursuant to Article VII, the
Reinsurer shall close the Daily Settlement Account and any closing balance
therein shall be the property of the Reinsurer.
6.3. Monthly Settlement Reports. As soon as practicable but not more than
thirty (30) days following the end of each Monthly 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 Monthly Accounting Period required in Schedule G - Part
III (the "Monthly Settlement Report").
6.4. Quarterly Settlement Reports. As soon as practicable but not more than
forty (40) days following the end of each Quarterly 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 Quarterly Accounting Period required in Schedule G -
Part IV (the "Quarterly Settlement Report"). The Company and the Reinsurer agree
that the financial data set forth on the Monthly Settlement Reports used for
purposes of the Monthly Settlements, shall be trued-up to actual amounts in the
next Quarterly Settlement Report and the net amount, if any, subsequently due to
the Company or the Reinsurer, as the case may be, as a result of such
adjustments shall be paid to the Company or the Reinsurer, as applicable. For
the avoidance of doubt, the first Quarterly Settlement Report will include all
transactions with respect to the Reinsured Contracts occurring from the
Inception Date through June 30, 2004.
6.5. Quarterly Financial Reports. As soon as practicable but not more than
forty (40) days following the end of each Quarterly Accounting Period ending
after the Closing Date (or more frequently as mutually agreed by the parties),
the Company shall supply the Reinsurer with reports related to the Reinsured
Contracts as may be reasonably requested for use in connection with the
preparation of the Reinsurer's SAP financial statements or other reports
prepared by the Reinsurer in compliance with its internal reporting
requirements. The parties shall cooperate in good faith to establish the form
for the providing of such reports.
6.6. 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 G -
Part V (the "Annual Report").
6.7. Accounting Period MODCO Reserve Adjustment. At the end of each
Quarterly Accounting Period, the Company shall compute an amount equal to the
absolute value of the increase or decrease in the Separate Account Reserves due
to subaccount investment performance for the Quarterly Accounting Period just
ended (the "Quarterly Accounting Period MODCO Adjustment"). The Quarterly
Accounting Period MODCO Adjustment for each Quarterly Accounting Period shall be
reflected in the Quarterly Settlement Report for such Quarterly Accounting
Period.
6.8. 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
14
information as may be reasonably requested by such other party for regulatory,
tax or similar purposes and reasonably available to it.
6.9. 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 Xxxx discount rate on the date that the payment
becomes overdue plus 200 basis points, for the period that the amount is
overdue.
ARTICLE VII
DURATION AND TERMINATION
------------------------
7.1. Duration. Except as otherwise provided herein, this Agreement shall be
unlimited in duration.
7.2. Reinsurer's Liability. The Reinsurer's liability with respect to the
Reinsured Risks will terminate on the earliest of: (i) the date the Company's
liability with respect to the Reinsured Risks is terminated and all amounts due
the Company from the Reinsurer with respect to such Reinsured Risks are paid to
the Company by or on behalf of the Reinsurer; and (ii) the date this Agreement
is terminated upon the written agreement of the parties.
7.3. Notice of Termination. Upon the termination of the Reinsurer's
liability with respect to the Reinsured Risks referred to in Section 7.2 above,
the parties shall mutually give the Trustee written notice of their intention to
terminate the Trust Account.
ARTICLE VIII
INSOLVENCY
----------
8.1. 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.
8.2. Expenses. It is further understood that any expense thus incurred by
the Reinsurer pursuant to Section 8.1 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
15
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 IX
CREDIT FOR REINSURANCE
----------------------
9.1. Reinsurance Credit. Notwithstanding any other provision of this
Agreement to the contrary, if the Reinsurer becomes unauthorized or otherwise
unaccredited as an insurer or reinsurer in any U.S. jurisdiction to which the
Company must provide statutory statements of financial condition such that the
Company will not obtain full statutory financial statement credit for
reinsurance in such state for the reinsurance provided under this Agreement, the
Reinsurer, upon the request of the Company, will establish, at the Reinsurer's
sole cost and option, any 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 X
REINSURANCE SECURITY
--------------------
10.1. Trust. (a) On the Closing Date, the Reinsurer shall enter into a
trust agreement in the form attached as Schedule H (the "Trust Agreement") and
establish a trust account (the "Trust Account") for the benefit of the Company
with respect to the Reinsured Risks with a bank (the "Trustee") designated as a
Qualified United States Financial Institution by the Securities Valuation Office
of the National Association of Insurance Commissioners or any successor
organization or regulatory agency having similar duties.
(b) The Reinsurer agrees to deposit, and maintain in the Trust Account with
respect to this Agreement, assets to be held in trust by the Trustee for the
benefit of the Company as security for the payment of the Reinsurer's
obligations to the Company under this Agreement.
(c) The parties agree that the assets so deposited with respect to this
Agreement shall be valued according to their current statutory book value on the
books of the Reinsurer and shall consist only of cash (United States legal
tender), certificates of deposit (issued by a United States bank and payable in
United States legal tender), and other assets of the type specified on Schedule
I 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,
16
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 Requirement") equal to the sum of General Account
Reserves and any additional reserves attributable to the
Reinsured Risks that arise as a result of regulatory asset
adequacy analysis requirements of the Reinsurer; and
(iii) in the event that General Electric Capital Corporation breaches
its obligations under the Capital Maintenance Agreement, to fund
an account with the Company (the "Company Account") in an amount
at least equal to the deduction, for reinsurance ceded, from the
Company's liabilities ceded under this Agreement. Such amount
shall include, but not be limited to, amounts for policy
reserves, reserves for claims and losses incurred (including
losses incurred but not reported), loss and loss adjustment
expenses, and unearned premiums.
(f) In the event that the Company withdraws assets from the Trust Account
for the purposes set forth in Section 10.1(e)(i) above in excess of actual
amounts required to meet the Reinsurer's obligations to the Company, the Company
will promptly return such excess to the Reinsurer plus interest at an annual
rate equal to the then current thirty (30) day U.S. Treasury Xxxx discount rate
on the date of withdrawal plus 200 basis points for the period during which the
amounts were held pursuant to Section 10.1(e)(i). In the event that the Company
withdraws assets from the Trust Account for the purposes set forth in Section
10.1(e)(iii) above, (i) the Reinsurer shall be relieved of its obligation to
maintain assets in the Trust Account pursuant to this Section 10.1 to the extent
of the amount of funds held in the Company Account and (ii) the Company shall
first apply the funds in the Company Account in satisfaction of the Reinsurer's
liability under this Agreement until the funds in the Company Account are
exhausted. In the event that the Company withdraws assets from the Trust Account
for the purposes set forth in Section 10.1(e)(iii) above, promptly following the
date the Reinsurer's liability with respect to the Reinsured Risks is
terminated, the Company shall return to the Reinsurer any assets so withdrawn
that, together with any and all interest, dividends and other earnings thereon
from the date of withdrawal to the date of return, are in excess of actual
amounts required to meet the Reinsurer's obligations to the Company under this
Agreement.
17
(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 General Account Reserves as of the close of business on
the day immediately preceding the Inception Date.
(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 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
--------------------------
11.1. Tax DAC Information Sharing. To ensure consistency in their
respective Tax DAC calculations for tax purposes, the Company and the Reinsurer
will exchange information pertaining to the amount of net consideration under
this Agreement each year. The Company will submit a schedule to the Reinsurer by
February 28 of each year presenting its calculation of the net consideration for
the preceding taxable year. The Reinsurer may contest the calculation by
providing to the Company an alternative calculation in writing within thirty
(30) days of receipt of the Company's schedule. The Company and the Reinsurer
will act in good faith to resolve any differences in the schedule of
calculations within thirty (30) days of receipt of the alternative calculation
to ensure consistent amounts are reported on the respective tax returns for the
preceding tax year.
18
ARTICLE XII
DISPUTE RESOLUTION
------------------
12.1. 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 XII, 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 12.2, all
communications between the parties or their representatives in connection with
the attempted resolution of any Dispute, including any mediator's evaluation
referred to in Section 12.3, 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.
(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
XII are pending. The parties will take such action, if any, required to
effectuate such tolling.
12.2. Consideration by Senior Executives. If a Dispute is not resolved in
the normal course of business at the operational level, the parties shall
attempt in good faith to resolve such Dispute by negotiation between executives
who hold, at a minimum, the office of President and CEO of the respective
business entities involved in such Dispute. Either party may initiate the
executive negotiation process by providing a written notice to the other (the
"Initial Notice"). Fifteen (15) days after delivery of the Initial Notice, the
receiving party shall submit to the other a written response (the "Response").
The Initial Notice and the Response shall include (i) a statement of the Dispute
and of each party's position, and (ii) the name and title of the executive who
will represent that party and of any other person who will accompany the
executive. Such executives will meet in person or by telephone within thirty
(30) days of the date of the Initial Notice to seek a resolution of the Dispute.
12.3. Mediation. If a Dispute is not resolved by negotiation as provided in
Section 12.2 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
19
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.
12.4. Arbitration. (a) If a Dispute is not resolved by mediation as
provided in Section 12.3 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 City. Each party shall be permitted to present its case,
witnesses and evidence, if any, in the presence of the other party. A written
transcript of the proceedings shall be made and furnished to the parties. The
arbitrators shall determine the Dispute in accordance with the law of Virginia,
without giving effect to any conflict of law rules or other rules that might
render such law inapplicable or unavailable, and shall apply this Agreement
according to its terms, provided that the provisions relating to arbitration
shall be governed by the Federal Arbitration Act, 9 U.S.C. xx.xx. 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 12.4(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.
20
Upon appointment of the tribunal following any grant of interim relief by a
court, the tribunal may affirm or disaffirm such relief, and the parties will
seek modification or rescission of the court action as necessary to accord with
the tribunal's decision.
(f) Each party will bear its own attorneys' fees and costs incurred in
connection with the resolution of any Dispute in accordance with this Article
XII.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
13.1. 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.
13.2. Notices. All notices, requests, demands and other communications
under this Agreement must be in writing and will be deemed to have been duly
given or made as follows: (a) if sent by registered or certified mail in the
United States return receipt requested, upon receipt; (b) if sent by reputable
overnight air courier, two business days after mailing; (c) if sent by facsimile
transmission, with a copy mailed on the same day in the manner provided in (a)
or (b) above, when transmitted and receipt is confirmed by telephone; or (d) if
otherwise actually personally delivered, when delivered, and shall be delivered
as follows:
If to the Company:
GE Life and Annuity Assurance Company
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
With a copy to:
GE Life and Annuity Assurance Company
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: General Counsel
If to the Reinsurer:
Union Fidelity Life Insurance Company
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
21
With a copy to:
Union Fidelity Life Insurance Company
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
or to such other address or to such other Person as either party may have last
designated by notice to the other party.
13.3. 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 13.3 shall be void and shall have no force and effect. Nothing in this
Section 13.3 shall be construed to prohibit the Reinsurer from retroceding all
or any portion of the business reinsured hereunder.
13.4. 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.
13.5. 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.
13.6. Amendments. This Agreement may not be changed, altered or modified
unless the same shall be in writing executed by the Company and the Reinsurer.
13.7. Governing Law. This Agreement will be construed, performed and
enforced in accordance with the laws of the Commonwealth of Virginia without
giving effect to its principles or rules of conflict of laws thereof to the
extent such principles or rules would require or permit the application of the
laws of another jurisdiction.
13.8. 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
22
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.
13.9. 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.
13.10. 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.
13.11. Cooperation. Each party hereto shall cooperate fully with the other
in all reasonable respects in order to accomplish the objectives of this
Agreement including making available to each their respective officers and
employees for interviews and meetings with Governmental Authorities and
furnishing any additional assistance, information and documents as may be
reasonably requested by a party from time to time.
13.12. 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.
13.13. 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.
13.14. 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."
13.15. Survival. Article XII and Article XIII shall survive the termination
of this Agreement.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
GE LIFE AND ANNUITY ASSURANCE COMPANY
By /s/ XXXXXX X. XXXXX
--------------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Vice President
UNION FIDELITY LIFE INSURANCE COMPANY
By /s/ XXXXX XXXXX
-------------------------------------------------------
Name: Xxxxx Xxxxx
Title: Senior Vice President and Secretary
24
SCHEDULE A
POLICY FORMS
------------
--------------------------------------------------------------------------------
P1098 Asset Allocation Annuity/Commonwealth
Variable Annuity
P1143 CVA Plus
--------------------------------------------------------------------------------
P1140 CVA 90
P5166 - Partial Surrender Endorsement
P4909 - Guarantee Acct. Rider
P4910 - Death Provisions Endorsement
P4911 - Surrender Charge Endorsement
P5058 - Nursing Home Waiver
P5077 - Joint Annuitant
P5076 - Trust Endorsement
P4912 - Deferred Premium Tax Endorsement
--------------------------------------------------------------------------------
P1142 CVA Xxxxxxxx
P5166 - Partial Surrender Endorsement
P4907 - Guarantee Acct. Rider
P4910 - Death Provisions Endorsement
P4911 - Surrender Charge Endorsement
P5058 - Nursing Home Waiver
P5077 - Joint Annuitant
P5076 - Trust Endorsement
P4912 - Deferred Premium Tax Endorsement
--------------------------------------------------------------------------------
P1150 CVA Plus
P5158 - Ratchet
P5166 - Partial Surrender Endorsement
P4907 - Guarantee Acct. Rider (3%)
P4909 - Guarantee Acct. Rider (4%)
P4911 - Surrender Charge Endorsement
P5058 - Nursing Home Waiver
P5117 - Overage Issues (Death Benefit)
P5137 - Immediate Allocation
P5103 - Guaranteed Minimum Death Benefit
--------------------------------------------------------------------------------
P1152 Extra
P5235 - Step-up or Roll-up Rider
P5222 - Step-up
P5240 - Estate Protector
P5234 - Roll-up Rider
--------------------------------------------------------------------------------
P1151 Freedom*
P5235 - Step-up or Roll-up Rider
P5222 - Step-up
P5240 - Estate Protector
P5234 - Roll-up Rider
--------------------------------------------------------------------------------
P1153 Savvy
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
P1154 Choice*
P5234 - Step-up or Roll-up Rider
P5233 - Step-up
P5239 - Estate Protector
P5223 - Roll-up Rider
--------------------------------------------------------------------------------
P1156 Selections
P5234 - Step-up or Roll-up Rider
P5233 - Step-up
P5239 - Estate Protector
P5223 - Roll-up Rider
--------------------------------------------------------------------------------
P1160 401k
--------------------------------------------------------------------------------
*Excluding Cross Funding Policies with plan sequence numbers 261, 262 and 263 on
Freedom and Choice products.
SCHEDULE B
SEPARATE ACCOUNTS
-----------------
GE Life & Annuity Separate Account 4
SCHEDULE C
FORM OF ADMINISTRATIVE SERVICES AGREEMENT
-----------------------------------------
SCHEDULE D
CEDING COMMISSION
-----------------
The Ceding Commission shall be the sum of the following:
1. an amount equal to the excess of (i) the General Account Reserves as of the
Inception Date over (ii) the net reserves of the Company with respect to
the General Account Liabilities (net after deduction for Ceded Reinsurance)
as of the Inception Date, determined in accordance with GAAP (which amount
may be negative);
2. an amount equal to the unamortized PVFP intangible asset balance of the
Company (excluding any related xxxx 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 xxxx 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 xxxx 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 E
ASSETS
------
SCHEDULE F
EXPENSE ALLOWANCES
------------------
The "Annual Expense Reimbursement Factor" used to calculate the Expense
Allowance is as follows:
Policy Maintenance Factor $59.73 per Policy less $64.69 per Policy of fund
company administrative expense service shares.
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 credit for Fund Company Administrative Expense Service Shares will be
redetermined annually to reflect historical amounts of reimbursement relating to
Reinsured Contracts, current period number of units, and changes in contractual
arrangements with Fund Companies.
The combined prospective unit cost, additional adjustment and Fund Company
Administrative Expense Service Shares credit is the Annual Expense Reimbursement
Factor. The Expense Allowance will be determined quarterly and billed to the
Reinsurer in three equal installments during the quarter at the end of the
month. Each installment will be determined by multiplying the actual number of
units at the beginning of the quarter covered by this Agreement times the Annual
Expense Reimbursement Factor (divided by twelve).
(d) Review of Documents. Following the delivery of the Annual Expense
Reimbursement Factor Documents or the Triennial Study Documents, as applicable,
the Company shall (i) provide to the Reinsurer or its designated representative
copies of such additional work papers and other documents relating to its
preparation of the Annual Expense Reimbursement Factor Report or Triennial
Study, as applicable, as the Reinsurer or its designated representative may
reasonably request, including, without limitation, claims files and practices
and (ii) cooperate with, and make its personnel and facilities reasonably
available to, the Reinsurer and the Reinsurer's designated representative for
the purpose of providing such other information as the Reinsurer or the
Reinsurer's designated representative may reasonably request concerning Annual
Expense Reimbursement Factor Documents or the Triennial Study Documents, as
applicable, and the calculation of the Annual Expense Reimbursement Factor.
(e) Notice of Disagreement. In the event that the Reinsurer has any disagreement
with any of the Annual Expense Reimbursement Factor Documents or the Triennial
Study Documents, as applicable, the Reinsurer shall give written notice of all
such disagreements (a "Notice of Disagreement") to the Company within thirty
(30) days after the Annual Expense Reimbursement Factor Documents or the
Triennial Study Documents, as applicable, are delivered to the Reinsurer. Any
Notice of Disagreement shall set forth each item in disagreement and shall
provide reasonable specificity as to the basis for each disagreement and shall
specify the total adjustment to the Annual Expense Reimbursement Factor, as
proposed by the Company as a result of such items in disagreement.
(f) Dispute Resolution. If the Reinsurer does not deliver a Notice of
Disagreement to the Company within such thirty (30) day period, the Annual
Expense Reimbursement Factor Documents and the Triennial Study Documents, as
applicable, shall be final and binding upon 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 G - PART I
INITIAL REPORT
--------------
1. SAP General Account Reserves $__________
2. Ceding Commission:
A. Excess SAP General Account Reserves over GAAP net reserves for
General Account Liabilities:
1) Total SAP General Account Reserves $__________
2) Total GAAP net reserves for General Account $__________
Liabilities 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 Closin Date $__________
Net Due Reinsurer (1-2-3+4) $__________
SCHEDULE G - PART II
DAILY SETTLEMENT REPORT
-----------------------
Settlement Amount
-----------------
Current Day Quarter-To-Date
1. Premium/Deposits Received from $_________________ $_________________
Contractholders
2. Net Sales/Redemptions of UIT Shares $_________________ $_________________
3. Net Purchases of UIT Shares $_________________ $_________________
4. Payments to Contractholders from $_________________ $_________________
Policy Owner Services
5. Payment to Contractholder $_________________ $_________________
Beneficiaries for claims
[1+2-3-4-5] $_________________ $_________________
SCHEDULE G - PART III
MONTHLY SETTLEMENT REPORT
-------------------------
Current Month
Settlement Amount Estimate Quarter-To-Date
----------------- -------- ---------------
1. Mortality and Expense Charges $__________ $__________
2. Premium Taxes $__________ $__________
3. Expense Factor $__________ $__________
4. Ceded Reinsurance Premiums $__________ $__________
5. Ceded Reinsurance Benefits/Recoverables $__________ $__________
6. Commissions and Other Fees or Compensation
Paid: Trail and Add On (See Schedule J) $__________ $__________
7. Insolvency Fund or Similar Assessments Paid $__________ $__________
8. Other $__________
[1-2-3-4+5-6-7-8] $__________ $__________
SCHEDULE G - PART IV
QUARTERLY SETTLEMENT REPORT
---------------------------
Previously Actual True
Reported Quarter Up
Results
------------------------------------
Daily Settlement Reconciliation ________ ________ ________
1 Premiums
UIT Sales and Purchases
2 Customer Transfers (Net) ________ ________ ________
3 Redemption of Shares for Surrender Charges ________ ________ ________
4 Redemption of Shares for Rider Fees and Loads ________ ________ ________
5 Corrections and Gain/Loss ________ ________ ________
Payments to Contractholders and Beneficiaries
6 Surrenders and Withdrawals ________ ________ ________
7 Return of Premium-Freelooks ________ ________ ________
8 Death Benefits (Standard and Enhanced) ________ ________ ________
9 Net (+1 +/-2 +3+4+/-5-6-7-8) ________ ________ ________
Monthly Settlement Reconciliation ________ ________ ________
10 Mortality & Expense Charges ________ ________ ________
11 Premium Taxes ________ ________ ________
12 Expense Factor ________ ________ ________
13 Ceded Reinsurance Premium ________ ________ ________
14 Ceded Reinsurance Benefits/Recoverables ________ ________ ________
15 Commissions and other Fees or Compensation Paid ________ ________ ________
16 Insolvency Fund or Similar Assessments Paid ________ ________ ________
17 Extra Contractual Liabilities Paid ________ ________ ________
18 Other ________ ________ ________
19 Net (x00-00-00-00+00-00-00-00+/-18) ________ ________ ________
00 Xxxxxxxxx Xxxxxxxxxx (9+19) ________ ________ ________
MODCO Adjustment Reconciliation
21 Beginning Separate Account Reserves ________
22 UIT Sales and Purchases (+/-2 +3+4+/-5) ________
23 Mortality & Expense Charges (10) ________
24 UIT Appreciation ________
25 Ending Separate Account Reserves (+21-22-23+/-24) ________
SCHEDULE G - PART V
ANNUAL REPORT
-------------
--------------------------------------------------------------------------------
The following in the same level of detail as the quarterly settlements:
--------------------------------------------------------------------------------
1. Premiums
--------------------------------------------------------------------------------
2. UIT Sales and Purchases
--------------------------------------------------------------------------------
3. Payments to Contractholders and Beneficiaries
--------------------------------------------------------------------------------
4. Premiums Taxes
--------------------------------------------------------------------------------
5. Commissions and Other Fees or Compensation Paid
--------------------------------------------------------------------------------
Other information required to complete accounting and reporting:
--------------------------------------------------------------------------------
6. Expense allowance accrual at year end
--------------------------------------------------------------------------------
7. DAC and PVFP, as applicable
--------------------------------------------------------------------------------
8. Modco reserve to support completion of Schedule S and RBC
--------------------------------------------------------------------------------
SCHEDULE H
FORM OF TRUST AGREEMENT
-----------------------
SCHEDULE I
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.
SCHEDULE J
COMMISSIONS
-----------
--------------------------------------------------------------------------------
PRODUCT MAXIMUM STANDARD MAXIMUM TRAIL
COMMISSION* COMMISSION**
--------------------------------------------------------------------------------
CVA 90 5% 0.020833%
--------------------------------------------------------------------------------
CVA Xxxxxxxx
--------------------------------------------------------------------------------
CVA Plus 6% 0.020833%
--------------------------------------------------------------------------------
Extra 5.5% 0.020833%
--------------------------------------------------------------------------------
Freedom 1.4% 0.08333%
--------------------------------------------------------------------------------
Savvy Investor 1.4%
--------------------------------------------------------------------------------
Choice 7.0% 0.08333%
--------------------------------------------------------------------------------
Selections 6.0% 0.08333%
--------------------------------------------------------------------------------
*Each percentage listed is an aggregate percentage of purchase payments made by
the contract owner.
**Trail commissions shown are monthly rates.
Wholesaling Variable Compensation
--------------------------------------------------------------------------------
PRODUCT RSG IAN GFA IBG
--------------------------------------------------------------------------------
CVA 90 60bps 0 390bps 0
CVA Plus 60bps 0 390bps 0
Extra 70bps 120bps 325bps 50bps
Freedom 45bps 100bps 70bps 50bps
Savvy Investor 0 0 0 0
Choice 70bps 130bps 360bps 50bps
Selections 45bps 130bps 360bps 50bps
--------------------------------------------------------------------------------
Firm Marketing Related Expense Reimbursements
----------------------------------------------------------------------------------------------
Expense Reimbursement for Add Expense Reimbursement
Firm On Premium on Inforce (annual rates)
----------------------------------------------------------------------------------------------
ABN AMRO 25bps on Choice & Selections
----------------------------------------------------------------------------------------------
XX XXXXXXX 10bps on VA's > 1 year old
----------------------------------------------------------------------------------------------
BANK OF AMERICA 25bps on Choice & Extra 0bps on VA's - Yrs 0-2; 5bps on
Choice, Extra,
Selections - Yrs 3-5;
10bps on Choice, Extra,
Selections - Yrs 6+.
----------------------------------------------------------------------------------------------
5bps on Choice, Extra,
CHASE 15bps on Foundation Selections > 2 Yrs old.
----------------------------------------------------------------------------------------------
8bps on Choice, Choice NY,
FLEET QUICK & XXXXXX Extra, Selections > 1 Yr old.
----------------------------------------------------------------------------------------------
XXXXXXX XXXXX 15bps on Choice & Extra
----------------------------------------------------------------------------------------------
50bps Excess Comp on Choice;
25bps Excess Comp on Extra
XXXXXXX XXXXX BARNEY & Selections 4bps on VA's > 1 Yr old
----------------------------------------------------------------------------------------------
20bps on Choice, Extra, 5bps on Choice, Extra,
WACHOVIA SECURITIES LLC & Selections; 10bps on Freedom Selections > 1 Yr old
----------------------------------------------------------------------------------------------
ESSEX 25bps on Choice, Extra, Freedom
----------------------------------------------------------------------------------------------
COMERICA 5bps on Choice & Extra
----------------------------------------------------------------------------------------------
FIRST ALLIED SECURITIES 15bps on Choice, Extra, Selections
----------------------------------------------------------------------------------------------
FIRST TENNESSEE BANK 25bps on Choice & Extra
----------------------------------------------------------------------------------------------
H&R BLOCK 5bps on Choice & Extra
----------------------------------------------------------------------------------------------
10bps on Choice, Extra, Freedom,
HSBC Selections
----------------------------------------------------------------------------------------------
XXXX XXXXX 25bps on Choice & Extra
----------------------------------------------------------------------------------------------
LINSCO PRIVATE LEDGER 40bps on Choice, Extra, Freedom
----------------------------------------------------------------------------------------------
MCDONALD/KEY 25bps on Choice & Extra
----------------------------------------------------------------------------------------------
PRIMEVEST 20bps on Choice & Extra
----------------------------------------------------------------------------------------------
RBC XXXX XXXXXXXX INC 25bps on Choice & Extra
----------------------------------------------------------------------------------------------
5bps on VA's -
UBS PAINEWEBBER 20bps on Choice, Extra, Freedom 4/1/97 - 9/30/00 Block
----------------------------------------------------------------------------------------------
USB XXXXX XXXXXXX 25bps on Choice, Extra, Selections
----------------------------------------------------------------------------------------------
UVEST 25bps on Choice & Extra
----------------------------------------------------------------------------------------------
FINTEGRA 15bps on Choice & Extra
----------------------------------------------------------------------------------------------
IFMG 25bps on Choice, Extra, Selections
----------------------------------------------------------------------------------------------
STANFORD GROUP 15bps on Choice & Extra
----------------------------------------------------------------------------------------------
WASHINGTON MUTUAL 25bps on Choice
----------------------------------------------------------------------------------------------
Ceding Company Marketing Allowance on Add-On Premiums: 78bps