SECURITY TRUST AGREEMENT
Dated as of
December 31, 2004
by and among
Scottish Re Life (Bermuda) Limited
as Grantor,
Security Life of Denver International Limited
as Beneficiary,
The Bank of New York
as Trustee, and
The Bank of New York
as Securities Intermediary
TABLE OF CONTENTS
Page
Section 1. Deposit of Assets to the Security Trust Account...................2
Section 2. Withdrawal of Assets by Beneficiary from the Security Trust
Account.........................................................4
Section 3. Withdrawal of Assets by Grantor from the Security Trust Account...5
Section 4. Procedure for Withdrawals of Assets; Certain Covenants............6
Section 5. Redemption, Investment and Substitution of Assets.................7
Section 6. The Income Account................................................8
Section 7. Right to Vote Assets..............................................8
Section 8. Additional Rights and Duties of the Trustee and the Securities
Intermediary....................................................9
Section 9. The Trustee's Compensation, Expenses and Indemnification.........12
Section 10. Resignation of the Trustee.......................................12
Section 11. Termination of the Security Trust Account........................13
Section 12. Definitions......................................................14
Section 13. Governing Law....................................................18
Section 14. Successors and Assigns...........................................18
Section 15. Severability.....................................................18
Section 16. Entire Agreement.................................................18
Section 17. Amendments.......................................................18
Section 18. Notices, etc.....................................................18
Section 19. Headings.........................................................20
Section 20. Counterparts.....................................................20
EXHIBITS
A Security Trust Schedule
B Investment Policies
C SLDI Capital Adequacy Ratio Calculation
D Grantor Capital Adequacy Ratio Calculation
SECURITY TRUST AGREEMENT
SECURITY TRUST AGREEMENT, dated as of December 31, 2004 (the "Agreement"),
by and among Scottish Re Life (Bermuda) Limited, an insurance company organized
and existing under the laws of and domiciled in Bermuda (hereinafter the
"Grantor"), Security Life of Denver International Limited, a stock insurance
company organized and existing under the laws of and domiciled in Bermuda (such
insurer and its successors by operation of law, including, without limitation,
any liquidator, rehabilitator, receiver or conservator thereof, being
hereinafter referred to as the "Beneficiary"), The Bank of New York, a New York
banking corporation as trustee and as secured party, for the benefit of the
Beneficiary (such bank, in its capacity as trustee and as secured party, being
referred to as the "Trustee"), and The Bank of New York, a New York banking
corporation as trustee and as secured party, for the benefit of the Beneficiary
(such bank, in its capacity as securities intermediary, being referred to as the
"Securities Intermediary").
WITNESSETH:
WHEREAS, the Grantor, the Beneficiary, Security Life of Denver Insurance
Company, a stock life insurance company domiciled in Colorado ("SLD" and,
together with the Beneficiary, the "Sellers"), and Scottish Re Group Limited
("Purchaser"), the indirect parent corporation of the Grantor, and Scottish Re
(U.S.), Inc., a stock life insurance company domiciled in Delaware, have entered
into an Asset Purchase Agreement, dated as of October 17, 2004 (the "Asset
Purchase Agreement"), pursuant to which Sellers have agreed to sell, and the
Purchaser has agreed to purchase, the individual life reinsurance business and
certain assets of Sellers;
WHEREAS, the Grantor and the Beneficiary have entered into one or more
Reinsurance Agreements, dated as of the date hereof, whereby the Grantor, as
reinsurer, has agreed to reinsure specified business of the Beneficiary as
ceding insurer (hereinafter referred to as the "Reinsurance Agreements"); and
WHEREAS, pursuant to the terms of the Asset Purchase Agreement and the
Reinsurance Agreements, the Beneficiary is required to pay the Grantor the
amount of $330,000,000 (the "Security Amount"); and
WHEREAS, the Grantor desires to establish with the Trustee a trust account
(the "Security Trust Account") and transfer to the Trustee for deposit in the
Security Trust Account cash and other Assets in an amount equal to the Security
Amount in order to secure and to fund the obligation of Grantor (i) to make
payments in connection with a recapture of the business subject to the
Reinsurance Agreements after the occurrence of a Triggering Event up to an
amount equal to the Security Amount, and (ii) to fund the Reserve Trust Account
under certain circumstances; and
WHEREAS, the Trustee has agreed to act as Trustee hereunder and, in
accordance with the terms hereof, to hold cash or other Assets in trust in the
Security Trust Account on the terms herein set forth.
NOW, THEREFORE, for and in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereby agree as follows:
Section 1. Deposit of Assets to the Security Trust Account.
(a) Concurrently with the execution and delivery of this Agreement, the
Grantor hereby establishes a Security Trust Account and the Trustee hereby
accepts the Security Trust Account herein created and declared upon the terms
provided herein and shall administer the Security Trust Account as Trustee, and
with respect to the security interest granted in Section 1(f) hereof, and as
secured party for the exclusive benefit of the Beneficiary. The Grantor shall
establish and the Trustee shall maintain the Security Trust Account as a
securities account at The Bank of New York as Securities Intermediary with
regard to the Security Trust Account. The Trustee shall be the entitlement
holder with respect to the Security Trust Account. The Security Trust Account
shall be subject to withdrawal by the Beneficiary and the Grantor as provided
herein. The Trustee and its lawfully appointed successors are authorized and
shall have power to receive such cash and other securities and property as the
Grantor transfers to or vests in the Trustee or places under the Trustee's
possession and control, and to hold, invest, reinvest, manage and dispose of the
same for the uses and purposes and in the manner and according to the provisions
hereinafter set forth. All such trusteed assets at all times shall be maintained
as a trust account, separate and distinct from all other assets of the Trustee,
and shall be continuously maintained by the Trustee.
(b) Pursuant to Section 3.1(a) of the Reinsurance Agreement, the Grantor
shall transfer to the Trustee, for deposit to the Security Trust Account, on the
date hereof, cash and such other assets as may be designated by the Grantor in
an amount equal to the Security Amount (all such assets actually received in the
Security Trust Account and proceeds thereof are herein referred to individually
as an "Asset" and collectively as the "Assets").
(c) If, at the end of a calendar quarter, the fair market value of the
Assets in the Security Trust Account is less than the required amount as
specified on Exhibit A hereto (the "Required Amount") for the next calendar
quarter, other than as a result of withdrawals pursuant Section 3(c), (d) or (e)
the Grantor shall transfer cash or other assets to the Security Trust Account in
an amount equal to such deficiency. If, as a result of any withdrawal pursuant
to Section 3(e) the fair market value of the Assets in the Security Trust
Account falls below the Required Amount, the Grantor shall not have the right to
withdraw (i) any asset from the Security Trust Account, or (ii) any amount in
the Income Account, in each case until such time as the fair market value of the
Assets in the Security Trust Account following such withdrawal equals the
Required Amount.
(d) The Grantor hereby represents, warrants and covenants (i) that any
Assets transferred to the Trustee for deposit to the Security Trust Account will
be in such form that the Beneficiary may, upon satisfaction of the conditions
set forth in Section 2, and the Trustee, upon written direction by the
Beneficiary may, negotiate any such Assets without consent or signature from the
Grantor or any Person other than a Depository (as such term is hereinafter
defined) in accordance with the terms of this Agreement; and (ii) that all
Assets transferred to the Trustee for
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deposit to the Security Trust Account will consist only of cash (United States
legal tender) and Eligible Securities (as hereinafter defined).
(e) All Assets in the Security Trust Account shall be valued at their
current fair market value in U.S. dollars as determined by the Trustee in its
sole discretion exercised in a reasonable manner as described below. Within ten
(10) Business Days after the end of each month the Trustee shall send to the
Beneficiary and the Grantor a written report regarding the valuation of the
Assets at the end of such month (the "Valuation Report"). Each report shall
include a fair market value valuation of all Assets in the Security Trust
Account in accordance with the asset prices provided by the market makers or
such other appropriate independent sources of valuation as recommended in
writing to the Trustee by the Grantor's investment manager or, in their absence,
by an independent nationally recognized pricing service to which the Trustee
subscribes in the normal conduct of its business (e.g., Interactive Data,
Merrill Lynch, Bloomberg, Lehman Brothers Inc., etc.). The Trustee shall not be
liable for incorrect fair market value of Assets caused by the use of inaccurate
or erroneous prices provided by such pricing services or sources. If the price
is not available as set forth above, the Trustee can obtain the price by
retaining, at the expense of the Grantor and pursuant to the written
recommendation of the Grantor's investment manager, a major independent
securities valuation firm to appraise the value of such Assets. If the Grantor
or the Beneficiary disputes the fair market value of the Assets in the Security
Trust Account as set forth in the Valuation Report, then within ten Business
Days following receipt of the Valuation Report, the Grantor or the Beneficiary,
as the case may be, will notify the other party of its dispute regarding the
valuation (the "Valuation Dispute Notice"). The Valuation Dispute Notice shall
contain sufficient information to support the disputing party's valuation. The
Trustee shall not be a party to any dispute between the Grantor and Beneficiary
relating to the valuation of Assets set forth in the Valuation Report, but shall
be provided with a copy of any Valuation Dispute Notice delivered by the Grantor
or Beneficiary under this provision. The non-disputing party has five Business
Days from the receipt of the Valuation Dispute Notice to agree with the
disputing party's valuation or provide its own reasonable valuation of the
specific Assets in dispute (the "Asset Response"). During no more than four
Business Days after the Asset Response, the parties to the dispute will continue
to work to resolve the disagreement, failing which they shall disclose to each
other their final and last best proposal ("Proposal" as hereinafter defined) no
later than the end of such four Business Day period. For purposes hereof, a
"Proposal" of a party to the dispute shall consist of the valuation correction
and related information supporting the valuation correction. If no resolution of
disagreements is reached on or prior to the Business Day following such four
Business Days, the parties to the dispute will on such next following Business
Day submit their final and last best Proposal (previously disclosed to the other
party as provided above) to arbitration by a major independent securities
valuation firm, the identity of which shall be mutually agreed, and the parties
to the dispute will abide by the result of such arbitration, which arbitration
process shall require the arbitrator to select one of the two final and last
best Proposals and to render its opinion regarding the reasonableness of the
parties' actions for purposes of the next sentence. The cost of such arbitration
shall be borne by the party who delivered the Valuation Dispute Notice if it
rejects a reasonable Asset Response and otherwise the cost shall be shared
equally by the Beneficiary and Grantor. To the extent feasible, and at the joint
written direction of the Grantor and the Beneficiary, the Trustee shall adopt
the valuation methodology underlying the valuation adopted in arbitration or
agreed to by the Beneficiary and the Grantor.
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Pending resolution of any dispute with respect to valuation of Assets, the
Grantor and Beneficiary will continue to follow the requirements of this
Agreement based on the Trustee's Valuation Report as submitted. Upon resolution
of any dispute regarding the valuation, the Trustee will take the action
hereunder that it would otherwise have been required to take, if any.
(f) In order to secure the timely and complete payment and performance of
each and all of the Grantor's Obligations, the Grantor hereby grants to the
Trustee as agent of and as secured party for the exclusive benefit of the
Beneficiary, a security interest in the Grantor's right, title and interest in
the Security Trust Account and the Assets (including without limitation any
residual interest therein). The Trustee, as entitlement holder for the benefit
of the Beneficiary of all rights associated with the Assets and the Security
Trust Account, shall have control (as defined in the UCC) of the Assets and
Security Trust Account for the purpose of perfecting the interest granted hereby
and shall issue entitlement orders to the Securities Intermediary as instructed
by the Grantor and the Beneficiary in accordance with the terms of this
Agreement. The Grantor hereby authorizes the Beneficiary to file or to instruct
the Trustee to file UCC-1 Financing Statements with respect to the Security
Trust Account and the Assets for which such a financing statement is
appropriate, and hereby appoints the Beneficiary as attorney-in-fact for the
purpose of signing Grantor's name on any such financing statements. The Trustee
shall, at the written direction of the Beneficiary, file the completed UCC-1
Financing Statements delivered to the Trustee by the Beneficiary with respect to
the Security Trust Account and the Assets.
(g) The Required Amount shown on Exhibit A shall be proportionately
adjusted from time to time to reflect any adjustment pursuant to Section 2.5(h)
or 2.5(j) of the Asset Purchase Agreement, any PGAAP Adjustment Amount, any
Excess Withdrawal Amount and any Reserve Withdrawal Amount (but not any
withdrawal pursuant to Section 3(a), (e) or (f)). For the avoidance of doubt,
the proportionate adjustment to the Required Amount described in the immediately
preceding sentence shall be determined by the Grantor and the Beneficiary as
follows: the Required Amount for each quarter beginning with the quarter in
which such adjustment is effected shall be decreased by the same percentage that
the then current Assets in the Security Trust Account are decreased as a result
of any of the withdrawals or adjustments described in the immediately preceding
sentence.
Section 2. Withdrawal of Assets by Beneficiary from the Security Trust Account.
The Beneficiary shall have the right to direct the Trustee to withdraw
Assets from the Security Trust Account (i) to fund a recapture payment pursuant
to the terms of the Reinsurance Agreements following the occurrence of a
Triggering Event, or (ii) to fund any shortfalls in the Reserve Trust Account
following the occurrence of a Triggering Event, by providing a notice (the
"Beneficiary's Withdrawal Notice") to the Trustee, with a copy to the Grantor.
The Beneficiary's Withdrawal Notice shall specify the amount of Assets to be
withdrawn and the reason for the withdrawal and shall be signed by an authorized
signatory of the Beneficiary. Such Beneficiary's Withdrawal Notice shall be
effective, and shall be honored by the Trustee, on the tenth (10th) Business Day
after receipt by the Trustee. The Trustee shall deliver such Assets or the
proceeds thereof to (i) the Beneficiary, if such Assets or proceeds are being
withdrawn to fund a recapture payment, or (ii) the Reserve Trust Account, if
such Assets or proceeds are being withdrawn to fund a shortfall in the Reserve
Trust Account.
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Section 3. Withdrawal of Assets by Grantor from the Security Trust Account.
(a) Prior to the occurrence of a Triggering Event, the Grantor shall have
the right to direct the Trustee to withdraw such Assets or amounts from the
Security Trust Account at the end of each calendar quarter that are in excess of
the Required Amount for the next calendar quarter as specified on Exhibit A, by
providing a notice (the "Grantor's Withdrawal Notice") to the Trustee, with a
copy to the Beneficiary. The Grantor's Withdrawal Notice shall specify the
amount or Assets to be withdrawn and shall be signed by an authorized signatory
of the Grantor. Such Grantor's Withdrawal Notice shall be effective, and shall
be honored by the Trustee, on the tenth (10th) Business Day after receipt by the
Trustee. The Trustee shall deliver such amount or Assets or the proceeds thereof
to the Grantor. After such time as the Beneficiary has provided the Trustee with
notice that a Triggering Event has occurred (a "Triggering Event Notice"), the
Trustee will not honor any Grantor's Withdrawal Notice until such time as the
Beneficiary provides the Trustee with notice that such Triggering Event has been
cured.
(b) Prior to the occurrence of a Triggering Event, Grantor shall have the
right to direct the Trustee to withdraw excess amounts ("Excess Withdrawal
Amounts") from the Security Trust Account in proportion to the reduction of the
Excess Reserve Amount as defined in Section 5.24 of the Asset Purchase Agreement
(i) upon implementation of any Purchaser Facility in accordance with Section
5.24 of the Asset Purchase Agreement, or (ii) upon novation of the Insurance
Contracts, by providing written notice to the Trustee of such withdrawal (an
"Excess Withdrawal Notice"), with a copy to the Beneficiary. For avoidance of
doubt, the proportion referred to in the immediately preceding sentence shall be
determined as follows: the then current balance in the Security Trust Account
may be withdrawn pursuant to this Section 3(b) in the same percentage as the
then-current Excess Reserve Amount is decreased as a result of the
implementation of a Purchaser Facility or novations, as the case may be. The
Excess Withdrawal Notice shall specify the Excess Withdrawal Amount, shall be
signed by an authorized signatory of the Grantor and shall be deemed to have
been approved, unless the Beneficiary shall indicate in writing to the Grantor
and the Trustee that it desires to contest the Grantor's representations within
ten (10) Business Days following the receipt of the Excess Withdrawal Notice.
Unless contested by the Beneficiary, the Trustee shall deliver the Excess
Withdrawal Amount to the Grantor.
(c) In the event that the Reserves established and maintained by the
Grantor under the Reinsurance Agreements are increased as a result of an
accounting adjustment under Bermuda SAP required to be made under applicable
purchase accounting principles in connection with the transactions contemplated
by the Asset Purchase Agreement, the Grantor shall have the right to withdraw
Assets from the SLDI Security Trust Account in an amount equal to the amount of
such increase (the "PGAAP Adjustment Amount") by providing a notice (the "PGAAP
Withdrawal Notice") to the trustee, with a copy to the Beneficiary. The PGAAP
Withdrawal Notice shall specify the PGAAP Adjustment Amount, shall be signed by
an authorized signatory of the Grantor and shall be deemed to have been
approved, unless the Beneficiary shall indicate in writing to the Grantor and
the Trustee that it desires to contest the PGAAP Adjustment Amount within ten
(10) Business Days following the receipt of the PGAAP Withdrawal Notice. Unless
contested by the Beneficiary, the Trustee shall deliver the PGAAP Adjustment
Amount to the SLDI Reserve Trust Account.
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(d) In the event that the Reserves required under the Reinsurance
Agreements are materially increased as a result of a required change in
assumptions or methodology, the Grantor shall have the right to direct the
Trustee to withdraw an amount equal to such increase (the "Reserve Withdrawal
Amount") by providing a notice (the "Reserve Withdrawal Notice") to the Trustee,
with a copy to the Beneficiary. The Reserve Withdrawal Notice shall specify the
Reserve Withdrawal Amount and shall be signed by an authorized signatory of the
Grantor; provided that no such withdrawal is permitted without the Beneficiary's
consent, which consent shall not be unreasonably withheld. Any amounts withdrawn
by the Grantor pursuant to this Section 3(d) from the Security Trust Account
shall be deposited directly into the Reserve Trust Account.
(e) Upon the occurrence of a Triggering Event other than a Triggering Event
resulting from any event described in clause (iv) or (v) of the definition of
the Triggering Event, the Grantor shall have the right to direct the Trustee to
withdraw such Assets or amounts from the Security Trust Account to fund any
shortfall in the Reserve Trust Account by providing a notice to the Trustee of
such withdrawal (a "Reserve Trust Shortfall Notice"), with a copy to the
Beneficiary. The Reserve Trust Shortfall Notice shall specify the amount or
Assets to be withdrawn and shall be signed by an authorized signatory of the
Grantor. Such Reserve Trust Shortfall Notice shall be effective, and shall be
honored by the Trustee, on the tenth (10th) Business Day after receipt by the
Trustee. The Trustee shall deliver such amount of Assets or the proceeds thereof
to the Reserve Trust Account.
(f) Upon the occurrence of an ING Event, the Grantor shall have the right
to direct the Trustee to withdraw all Assets or amounts from the Security Trust
Account by providing a notice to the Trustee (an "ING Event Notice"), with a
copy to the Beneficiary. The ING Event Notice shall specify the amount or Assets
to be withdrawn and shall be signed by an authorized signatory of the Grantor.
Such ING Event Notice shall be effective, and shall be honored by the Trustee,
on the tenth (10th) Business Day after receipt by the Trustee. The Trustee shall
deliver such amount of Assets or the proceeds thereof to the Grantor.
Section 4. Procedure for Withdrawals of Assets; Certain Covenants
(a) Following receipt from the Beneficiary or the Grantor (as the case may
be) of a Beneficiary's or Grantor's Withdrawal Notice, a PGAAP Withdrawal
Notice, a Reserve Withdrawal Notice, an Excess Withdrawal Notice, a Reserve
Trust Shortfall Notice or an ING Event Notice, and in accordance with Sections 2
and 3 as applicable, and provided that with respect to withdrawals pursuant to
Sections 3(a) and (b), the Trustee has not received a Triggering Event Notice,
the Trustee shall promptly take any and all steps necessary to transfer,
absolutely and unequivocally, all right, title and interest to the Assets or
amounts specified in such Beneficiary's Withdrawal Notice, Grantor's Withdrawal
Notice, PGAAP Withdrawal Notice, Reserve Withdrawal Notice, Excess Withdrawal
Notice, Reserve Trust Shortfall Notice or ING Event Notice and shall deliver
such Assets or amounts as specified in such Beneficiary's Withdrawal Notice,
Grantor's Withdrawal Notice, PGAAP Withdrawal Notice, Reserve Withdrawal Notice,
Excess Withdrawal Notice, Reserve Trust Shortfall Notice or ING Event Notice.
The Trustee shall be protected in relying conclusively upon any written demand,
instruction, direction, acknowledgment, statement, notice, resolution, request,
consent, order, certificate, report, appraisal, opinion, telegram, cablegram,
facsimile, radiogram, letter, or other
6
communication (collectively, "Communications") of the Beneficiary or the Grantor
for any such withdrawal that on its face conforms to requirements of this
Agreement. The Beneficiary or the Grantor, as the case may be, shall execute a
receipt evidencing the delivery of Assets or amounts when required in the normal
and customary transaction of the business of banking.
(b) Subject to Section 5 of this Agreement, in the absence of a
Beneficiary's or Grantor's Withdrawal Notice, PGAAP Withdrawal Notice, Reserve
Withdrawal Notice, Excess Withdrawal Notice, Reserve Trust Shortfall Notice or
ING Event Notice, the Trustee shall allow no substitutions or withdrawals of any
Asset from the Security Trust Account.
(c) Without limiting any other provision of this Agreement, the Trustee
shall have no responsibility whatsoever to determine that any Assets withdrawn
from the Security Trust Account pursuant to Sections 2 or 3 will be used and
applied in the manner contemplated by this Agreement.
(d) Subject to the terms of this Agreement, at the time any amount becomes
payable or Asset becomes transferable by the Trustee from the Security Trust
Account, such payment or transfer shall be effected in accordance with the
written instructions contained in a Beneficiary's Withdrawal Notice, Grantor's
Withdrawal Notice, PGAAP Withdrawal Notice, Reserve Withdrawal Notice, Excess
Withdrawal Notice, Reserve Trust Shortfall Notice or ING Event Notice. If no
such instructions from the Grantor or the Beneficiary are received by the
Trustee at least one full Business Day prior to the time set for such payment or
transfer, such payment or transfer shall be effected as follows: (i) first from
any cash in the Security Trust Account; (ii) then, from the proceeds of the sale
by the Trustee of any or all of the debt obligations in the Security Trust
Account (commencing with those obligations closest in maturity to the date in
question); (iii) then, from any other Assets in the Security Trust Account.
(e) Not later than sixty (60) calendar days after the end of each calendar
year, and forty-five (45) days after the end of any calendar quarter other than
any quarter ending on December 31, the Beneficiary shall provide to the Grantor
a calculation of (x) the risk based capital of SLD, and (y) the capital adequacy
ratio of the Beneficiary calculated as set forth on Exhibit C. Each such
calculation shall include reasonable supporting detail. The Beneficiary shall
also provide written notice of the occurrence of any ING Event within two (2)
Business Days after its occurrence. The Grantor may, at its own expense, review
the books and records of the Beneficiary or SLD to confirm the calculations
provided by the Beneficiary pursuant to this Section 4(e). In addition, the
Beneficiary shall cooperate fully with the Grantor and promptly respond to the
Grantor's inquiries form time to time concerning the determination of whether an
ING Event has occurred.
Section 5. Redemption, Investment and Substitution of Assets.
(a) The Trustee shall surrender for payment all maturing Assets and all
Assets called for redemption and deposit the proceeds of any such payment to the
Security Trust Account.
(b) From time to time the Grantor may direct the Trustee in writing (an
"Investment Order") to invest or reinvest cash or Eligible Securities held in
the Security Trust Account in accordance with the Investment Policies set forth
in Exhibit B. The Grantor agrees that all
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investments and substitutions of securities referred to in this paragraph (b) of
this Section 5 shall be and remain in compliance with the relevant limitations
of the applicable insurance laws and the Investment Policies set forth in
Exhibit B. The Trustee shall have no responsibility whatsoever to determine that
any Assets in the Security Trust Account are or continue to be Eligible
Securities. The Trustee, based upon Investment Orders from the Grantor or its
designee, shall execute Investment Orders and settle securities transactions by
itself or by means of an agent or broker retained by the Grantor. The Trustee
shall not be responsible for any act, error or omission, or for the solvency, of
any investment manager, agent or broker unless such act, error or omission is
the result, in whole or in part, of the Trustee's gross negligence, willful
misconduct or lack of good faith. The Trustee shall not be responsible for any
Loss (as herein defined) suffered by the Beneficiary or the Grantor due to the
insolvency of the investment manager, agent or broker.
(c) The Trustee shall not be liable for any loss, liability, claim or
damage paid or incurred ("Loss") by the Security Trust Account from any
investment, reinvestment, liquidation or substitution pursuant to the terms of
this Agreement other than a Loss due to the Trustee's own negligence, gross
negligence, willful misconduct or lack of good faith. Without limiting any other
provision herein, the Trustee shall not be liable for any Loss due to changes in
market rates or penalties for early redemption or any other fees, taxes or
changes.
Section 6. The Income Account.
All payments of interest and dividends in respect to Assets in the Security
Trust Account shall be deposited by the Trustee in a separate custody ledger
income account (the "Income Account") within the Security Trust Account
established and maintained by the Grantor at an office of the Trustee in New
York City. Any interest, dividend or other income automatically credited on the
payment date to the Income Account which is not subsequently received by the
Trustee shall be reimbursed by the Grantor to the Trustee and the Trustee may
debit the Income Account for this purpose. Pursuant to Section 9(a), the Trustee
shall have the right to deduct its compensation and expenses from the Income
Account, to the extent due and owing; except as provided in the final sentence
of Section 1(c), the balance of the Income Account shall be payable to the
Grantor at the end of each calendar month.
Section 7. Right to Vote Assets.
The Trustee will transmit to the Grantor and or its designee upon receipt,
and will instruct any entities authorized to hold Assets in accordance with the
terms hereof to transmit to the Grantor upon receipt, all financial reports,
stockholder communications, notices, proxies and proxy soliciting materials
received from issuers of Assets, and all information relating to exchange or
tender offers received from offerors with respect to such Assets. The Grantor
and/or its designee shall have the full unqualified right to vote and execute
consents and to exercise any and all proprietary rights not inconsistent with
this Agreement with respect to any securities or other property forming a part
of the Security Trust Account.
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Section 8. Additional Rights and Duties of the Trustee and the Securities
Intermediary.
(a) The Trustee shall, concurrent with delivery of each monthly Valuation
Report, deliver a summary of account activity for the month just ended to the
Grantor and the Beneficiary.
(b) Before accepting any Asset for deposit to the Security Trust Account,
the Trustee shall determine that such Asset is in such form that the Beneficiary
whenever necessary may, or the Trustee upon written direction by the Beneficiary
may, negotiate such Asset without consent or signature from the Grantor or any
other Person, other than a Depository and the Trustee in accordance with the
terms of this Agreement.
(c) The Trustee may deposit any Assets in the Security Trust Account in a
book-entry account maintained at a Federal Reserve Bank or in depositories such
as The Depository Trust Company, the Participants Trust Company, Cedel, and
Euroclear (the Federal Reserve Bank and such other depositories being referred
to herein as "Depositories"). Assets may be held in the name of a nominee
maintained by the Trustee or by any such Depositories.
(d) The Trustee shall accept and may open all mail directed to the Grantor
or the Beneficiary in care of the Trustee. The Trustee shall forward all mail to
the addressee whether or not opened.
(e) The Trustee shall keep full and complete records of the administration
of the Security Trust Account. Upon the reasonable written request of the
Grantor or the Beneficiary, the Trustee shall promptly permit the Grantor or the
Beneficiary, their respective agents, employees or independent auditors to
examine, audit, excerpt, transcribe and copy, at their own expense, during the
Trustee's normal business hours any books, documents, papers and records
relating to the Security Trust Account or the Assets.
(f) The Trustee is authorized to follow and rely conclusively upon all
Communications (including, without limitation, Investment Orders, Excess
Withdrawal Notices, Reserve Withdrawal Notices, Beneficiary's Withdrawal
Notices, Grantor's Withdrawal Notices, PGAAP Withdrawal Notices, Reserve Trust
Shortfall Notices, ING Event Notices and Termination Notices), given by
officers, agents and/or employees named in letters and incumbency certificates
furnished to the Trustee from time to time by the Grantor or the Beneficiary and
by attorneys-in-fact acting under written authority furnished to the Trustee by
the Grantor or the Beneficiary (collectively "Instructions") including
Instructions given by letter or facsimile transmission or electronic media, if
the Trustee reasonably believes such Instructions to be genuine and to have been
signed, sent or presented by the proper party or parties. The Trustee shall not
incur any liability to anyone resulting from actions taken by the Trustee in
reliance in good faith on such Instructions. The Trustee shall not incur any
liability in executing Instructions prior to receipt by it of (i) notice of the
revocation of the written authority of the individual(s) named therein or (ii)
notice from any officer, agent or employee of the Grantor or the Beneficiary
named in a letter or incumbency certificate delivered hereunder prior to receipt
by it of a more current certificate.
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(g) The duties and obligations of the Trustee shall only be such as are
specifically set forth in this Agreement, as it may from time to time be amended
in accordance with the terms hereof, and no implied duties or obligations shall
be read into this Agreement against the Trustee. The Trustee shall be liable
only for its own negligence, gross negligence, willful misconduct or bad faith.
In no event shall the Trustee be liable (i) for acting in accordance with or
relying upon any instruction, notice, demand, certificate or document
contemplated by and given in accordance with this Agreement from the Grantor or
the Beneficiary, (ii) for any consequential, punitive or special damages, (iii)
for the acts or omissions of its nominees, unless the Trustee chose such person
without due care, or (iv) for an amount in excess of the value of the Assets,
valued as of the most recent valuation report.
(h) No provision of this Agreement shall require the Trustee to take any
action which, in the Trustee's reasonable judgment, would result in any
violation of this Agreement or any provision of law.
(i) The Trustee may confer with counsel of its selection in relation to
matters arising under this Agreement and shall, upon demand, be indemnified and
held harmless from and against any and all Losses by the Grantor hereunder for
any actions taken, omitted or suffered by it in connection with this Agreement
or under any transaction contemplated hereby in good faith without gross
negligence or willful misconduct and in accordance with opinion of such counsel.
The opinion of such law firm shall be full and complete authority and protection
for the Trustee with respect to any action taken, suffered or omitted by it in
good faith and in accordance with the opinion of such law firm.
(j) Subject to the requirement of good faith, reasonableness and the lack
of gross negligence or willful misconduct, the Trustee shall be protected in
acting upon any Communications (including, without limitation, any Investment
Order or Instructions) reasonably believed by the Trustee to be genuine and to
have been signed, sent or presented by the proper party or parties. All notices
to the Trustee (unless otherwise provided therein) shall be deemed to be
effective when actually received by a responsible officer of the Trustee.
(k) Whenever, in the administration of the Security Trust Account created
by this Agreement, the Trustee shall reasonably deem it necessary or desirable
that a matter be proved or established prior to taking, suffering or omitting
any action thereunder, subject to the requirement of reasonableness, good faith
and lack of gross negligence and willful misconduct, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a statement or certificate signed by
or on behalf of the Grantor and/or the Beneficiary and delivered to the Trustee
and such certificate shall be full warrant to the Trustee for any action taken,
suffered or omitted by it on reliance thereon, subject to this paragraph, but in
its discretion exercised in a reasonable manner, the Trustee may in lieu thereof
accept other evidence of the fact or matter or may require such other or
additional evidence as it may deem reasonable.
(l) Except when otherwise expressly provided in this Agreement and subject
to the requirement of reasonableness, good faith and lack of negligence or
willful misconduct, any Communications (including, without limitation, any
Investment Order or Instructions) to be delivered or furnished by the Grantor or
the Beneficiary shall be sufficient to be delivered or
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furnished in the name of the Grantor or the Beneficiary by such officer or
officers of the Grantor or the Beneficiary as may be designated in a
certificate, resolution or letter of advice by such party. Written notice of
such designation by the Grantor or the Beneficiary shall be filed with the
Trustee. The Trustee shall be protected in acting upon any Communications
(including, without limitation, any Investment Order or Instruction) made by
such officer or agent of the Grantor or the Beneficiary with respect to the
authority conferred on it.
(m) Notwithstanding anything to the contrary provided herein, the Trustee
is not responsible for any Losses resulting from reasons or causes beyond its
control, including without limitation, nationalization, expropriation, currency
restrictions, acts of war, terrorism, insurrection, revolution, civil unrest,
riots or strikes, nuclear fusion or fission or acts of God.
(n) The Parties acknowledge that nothing in this Agreement shall obligate
the Trustee to extend credit, grant financial accommodation or otherwise advance
moneys for the purpose of making any payments or part thereof or otherwise
carrying out any Instructions, including, without limitation, any Investment
Order.
(o) In the event of any reasonable ambiguity or uncertainty hereunder or in
any notice, instruction or other communication received by the Trustee
hereunder, the Trustee may, in its reasonable discretion, refrain from taking
any action other than retain possession of the Assets, unless the Trustee
receives written instructions, signed by the Grantor and the Beneficiary, which
eliminate such ambiguity or uncertainty. In the event of any dispute between or
conflicting claims by or among the Grantor and the Beneficiary and/or any other
person or entity with respect to any Assets, the Trustee shall be entitled, in
its reasonable discretion, to refuse to comply with any and all claims, demands
or instructions with respect to such Assets, so long as such dispute or conflict
shall continue, and the Trustee shall not be or become liable in any way for
such failure or refusal to comply with such conflicting claims, demands or
instructions. The Trustee shall be entitled to refuse to act until, in its
reasonable discretion, either (i) such conflicting or adverse claims or demands
shall have been determined by a final order, judgment or decree of a court of
competent jurisdiction, which order, judgment or decree is not subject to
appeal, or settled by agreement between the conflicting parties as evidenced in
a writing satisfactory to the Trustee or (ii) the Trustee shall have received
security or an indemnity satisfactory to it sufficient to hold it harmless from
and against any and all Losses which it may incur by reason of so acting. The
Trustee may, in addition, elect, in its reasonable discretion, to commence an
interpleader action or seek other judicial relief or orders as it may deem, in
its sole discretion, if necessary. The costs and expenses (including reasonable
attorney's fees and expenses) incurred in connection with such proceeding shall
be paid by, and shall be deemed an obligation of, the Grantor.
(p) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, provided that the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder.
(q) The Securities Intermediary agrees that it will comply with entitlement
orders issued by the Trustee in accordance with the terms of this Agreement, and
that such compliance
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is not subject to any conditions, qualifications or further consents. The
Securities Intermediary will not comply with entitlement orders issued by any
other Person.
(r) The Securities Intermediary hereby waives any right of counterclaim,
bankers lien, liens or perfection rights as securities intermediary with respect
to the Assets, the proceeds thereof and the Security Trust Account.
Section 9. The Trustee's Compensation, Expenses and Indemnification.
(a) The Grantor, upon receipt of an invoice from the Trustee to the Grantor
and without offset to the Beneficiary's interest, (i) shall pay the Trustee, as
compensation for its services under this Agreement, a fee computed at rates
determined by the Trustee from time to time and communicated in writing to the
Grantor and (ii) shall pay or reimburse the Trustee for all of the Trustee's
expenses and disbursements in connection with its duties under this Agreement
(including reasonable attorneys' fees and expenses and reasonable accounting and
consulting fees and expenses), except any such expense or disbursement as may
arise from the Trustee's negligence, willful misconduct or lack of good faith.
The Trustee shall be entitled to deduct its compensation and expenses from
payments of dividends and interest in respect of the Assets held in the Income
Account as provided in Section 6 of this Agreement.
(b) The Grantor hereby indemnifies the Trustee for, and holds it harmless
against, any Losses (including reasonable attorneys' fees and expenses and
reasonable consulting and accountants' fees and expenses) incurred or paid
(other than as a result of the Trustee's gross negligence, willful misconduct or
lack of good faith), arising out of or in connection with the performance of its
duties and obligations under this Agreement, including without limitation any
Loss arising out of or in connection with the status of the Trustee in
connection with the performance of its duties and any nominee as the holder of
record of any or all of the Assets. The Grantor hereby acknowledges that the
foregoing indemnities shall survive the resignation of the Trustee or the
termination of this Agreement.
(c) No Assets shall be withdrawn from the Security Trust Account or used in
any manner for paying compensation to, or reimbursement or indemnification of,
the Trustee.
(d) The Trustee hereby waives any and all rights of offset, counterclaim
and recoupment against the Beneficiary and Security Trust Account, and waives
any lien (statutory or otherwise) that it may assert against the Security Trust
Account.
Section 10. Resignation of the Trustee.
(a) The Trustee may resign at any time by giving not less than ninety (90)
days' written notice thereof to the Beneficiary and to the Grantor, such
resignation to become effective on the acceptance of appointment by a successor
trustee and the transfer to such successor trustee of all Assets in the Security
Trust Account in accordance with paragraph (b) of this Section 10. The Grantor
and the Beneficiary jointly also may remove the Trustee at any time, without
assigning any reason therefor, on fifteen (15) days' prior written notice
thereof to the Trustee.
(b) Upon receipt of the Trustee's notice of resignation or notice to the
Trustee of removal, the Grantor and the Beneficiary shall promptly appoint a
successor trustee. Any
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successor trustee shall be a bank that is a member of the Federal Reserve System
or chartered in the State of New York and shall not be a parent, a subsidiary or
an affiliate of the Grantor or the Beneficiary. If a successor Trustee has not
accepted such appointment within thirty (30) days after the notice of
resignation or removal, the Trustee may, in its sole discretion, apply at the
expense of the Grantor to a court of competent jurisdiction for the appointment
of a successor Trustee or for other appropriate relief. The costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee in
connection with such proceeding shall be paid by, and be deemed an obligation
of, the Grantor. Upon the acceptance of the appointment as trustee hereunder by
a successor trustee, such successor trustee shall succeed to and become vested
with all the rights, powers, privileges and duties of the Trustee, and the
Trustee shall be discharged from any future duties and obligations under this
Agreement, but the Trustee shall continue after its resignation to be entitled
to the benefits of the indemnities provided herein for a Trustee.
Section 11. Termination of the Security Trust Account.
(a) The Security Trust Account and this Agreement, except for the
indemnities provided herein, which shall survive termination, may be terminated
by the Grantor, other than pursuant to an order of a court having jurisdiction,
upon the occurrence of any of the following events: (i) the release of all ING
Facilities pursuant to implementation of one or more Purchaser Facilities under
Section 5.24 of the Asset Purchase Agreement or upon the novation of all
Insurance Contracts or (ii) the depletion of all amounts and Assets in the
Security Trust Account. To effect termination of the Security Trust Account, the
Grantor shall give the Trustee written notice of its intention to terminate the
Security Trust Account (the "Notice of Intention"), and (ii) the Trustee shall
give the Beneficiary the written notice specified in paragraph (b) of this
Section 11. The Notice of Intention shall specify the date on which the Grantor
intends the Security Trust Account to terminate (the "Proposed Date").
(b) Within ten (10) Business Days following receipt by the Trustee of the
Notice of Intention, the Trustee shall give written notification (the
"Termination Notice") to the Beneficiary and the Grantor of the date (the
"Termination Date") on which the Security Trust Account shall terminate. The
Termination Date shall be (a) the Proposed Date (or if not a Business Day, the
next Business Day thereafter), if the Proposed Date is at least five (5) days
subsequent to the date the Termination Notice is given; or (b) five (5) days
subsequent to the date the Termination Notice is given (or if not a Business
Day, the next Business Day thereafter), if the Proposed Date is less than five
(5) days subsequent to the date the Termination Notice is given.
(c) On the Termination Date, after satisfaction of any outstanding
Withdrawal Notices, or deduction of amounts required to satisfy any outstanding
disputed Withdrawal Notices, and upon receipt of certification of the
Beneficiary that the Grantor has no further obligation to maintain the Security
Trust Account the Trustee shall transfer any Assets remaining in the Security
Trust Account to the Grantor, at which time all duties and obligations of the
Trustee with respect to such Assets shall cease.
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Section 12. Definitions.
Any capitalized term used but not defined herein shall have the meaning set
forth in the Asset Purchase Agreement. Except as the context shall otherwise
require, the following terms shall have the following meanings for all purposes
of this Agreement (the definitions to be applicable to both the singular and the
plural forms of each term defined if both such forms of such term are used in
this Agreement):
The term "Agreement" shall mean this Security Trust Agreement by and among
Grantor, Beneficiary, the Bank of New York as Trustee and the Bank of New York
as Securities Intermediary.
The term "Asset Purchase Agreement" shall have the meaning set forth in the
preamble.
The term "Asset Response" shall have the meaning specified in Section 1(e).
The term "Assets" shall have the meaning specified in Section 1(b).
The term "Beneficiary" shall mean Security Life of Denver Insurance
Company.
The term "Beneficiary's Withdrawal Notice" shall have the meaning specified
in Section 2.
The term "Business Day" shall mean any day on which the offices of the
Trustee in New York are open for business and shall refer to a full business
day.
The term "Communications" shall have the meaning specified in Section 4(a).
The term "Depositories" shall have the meaning specified in Section 8(c).
The term "Eligible Securities" shall mean and include any and all
securities and other investments that are permitted under applicable insurance
law as admitted assets in the preparation of the annual statement filed by the
Grantor, other than real estate and foreign investments, and permitted pursuant
to the Investment Policies attached hereto as Exhibit B.
The term "Excess Withdrawal Amounts" shall have the meaning specified in
Section 3(b).
The term "Excess Withdrawal Notice" shall have the meaning specified in
Section 3(b).
The term "Grantor" shall mean Scottish Re (U.S.), Inc.
The term "Grantor's Withdrawal Notice" shall have the meaning specified in
Section 3(a).
The term "Income Account" shall have the meaning specified in Section 6.
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The term "ING Event" shall mean any of the following occurrences:
(i) the existence of an insolvency, rehabilitation, conservation or
comparable proceeding by or against the Beneficiary, SLD, or ING Groep
N.V., a corporation organized in the Netherlands that is the indirect
parent corporation of ING, SLD and the Beneficiary, or any Person in the
direct chain of ownership between ING Groep N.V. and SLD and the
Beneficiary;
(ii) the risk based capital (under applicable Colorado Insurance Law
requirements), calculated quarterly, of SLD falls below 125% Company Action
Level RBC, and is not increased to at least 125% within thirty (30)
calendar days after the date upon which the Beneficiary is required to
provide to the Grantor the report pursuant to Section 4(e) of this
Agreement that would reflect such deficiency;
(iii) the capital adequacy ratio (as currently calculated for Standard &
Poor's as set forth on Exhibit C), calculated quarterly, of the Beneficiary
falls below 100%, and is not increased to at least 100% within thirty (30)
calendar days after the date upon which the Beneficiary is required to
provide to the Grantor the report pursuant to Section 4(e) of this
Agreement that would reflect such deficiency;
(iv) there has been a material breach of any "Reinsurance Agreement" (as
defined in the Asset Purchase Agreement) by the Beneficiary or SLD,
including, without limitation, failure to pay material premiums to the
Grantor or any Affiliate of Grantor, and such breach has not been cured
within thirty (30) days after notice.
The term "ING Event Notice" shall have the meaning specified in Section
3(f).
The term "Instructions" shall have the meaning specified in Section 8(f).
The term "Investment Orders" shall have the meaning specified in Section
5(b).
The term "Loss" shall have the meaning specified in Section 5(c).
The term "Notice of Intention" shall have the meaning specified in Section
11(a).
The term "Obligations" shall mean, with respect to the Reinsurance
Agreements, any and all amounts due and payable to the Beneficiary as defined
and explicitly set forth in the Reinsurance Agreements.
The term "Person" shall mean and include an individual, a corporation, a
limited liability company, a partnership, an association, a trust, an
unincorporated organization or a government or political subdivision thereof.
The term "PGAAP Adjustment Amount" shall have the meaning specified in
Section 3(c).
The term "PGAAP Withdrawal Notice" shall have the meaning specified in
Section 3(c).
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The term "Proposal" shall have the meaning specified in Section 1(e).
The term "Proposed Date" shall have the meaning specified in Section 11(a).
The term "Purchaser" shall have the meaning specified in the preamble.
The term "Reinsurance Agreements" shall mean the Reinsurance Agreements,
dated as of the date hereof, by and between the Grantor and the Beneficiary,
whereby the Grantor, as reinsurer, has agreed to reinsure a certain book of the
reinsurance business of the Beneficiary as ceding insurer.
The term "Required Amount" shall have the meaning specified in Section
1(c).
The term "Reserve Trust Account" shall mean the trust account established
pursuant to the Reserve Trust Agreement.
The term "Reserve Trust Agreement" shall mean the Reserve Trust Agreement,
dated the date hereof by and among the Grantor, the Beneficiary, The Bank of New
York, as Trustee and The Bank of New York, as Securities Intermediary.
The term "Reserve Trust Shortfall Notice" shall have the meaning specified
in Section 3(e).
The term "Reserve Withdrawal Amount" shall have the meaning specified in
Section 3(d).
The term "Reserve Withdrawal Notice" shall have the meaning specified in
Section 3(d).
The term "Scottish Annuity & Life" means Scottish Annuity & Life Insurance
Company (Cayman) Ltd., a company organized under the laws of the Cayman Islands.
The term "Scottish Re Group" means Scottish Re Group Limited, a holding
company organized under the laws of the Cayman Islands.
The term "Security Amount" shall have the meaning specified in the
preamble.
The term "Security Trust Account" shall mean the trust account established
pursuant to this Agreement.
The term "Securities Intermediary" shall mean The Bank of New York.
The term "Sellers" shall have the meaning specified in the preamble.
The term "SLD Reserve Trust Account" means the trust account established
pursuant to the SLD Reserve Trust Agreement.
The term "SLD Reserve Trust Agreement" shall mean the Reserve Trust
Agreement, dated the date hereof by and among the SLD, Scottish Re (U.S.) Inc.,
The Bank of New York, as Trustee and The Bank of New York, as Securities
Intermediary.
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The term "SLDI" shall have the meaning specified in the preamble.
The term "Termination Date" shall have the meaning specified in Section
11(b).
The term "Termination Notice" shall have the meaning specified in Section
11(b).
The term "Triggering Event" shall mean any of the following occurrences:
(i) the existence of an insolvency, rehabilitation, conservation or
comparable proceeding by or against the Grantor or any Affiliate of Grantor
that at the time in question is reinsuring any of the Business (an
"Affiliated Reinsurer"), Scottish Annuity & Life or Scottish Re Group or
any Person in the direct chain of ownership between the Grantor or any
Affiliated Reinsurer and Scottish Re Group;
(ii) the risk based capital, calculated quarterly, of any Affiliated
Reinsurer domiciled in the United States (such risk based capital to be
calculated in accordance with the insurance laws of the jurisdiction of
domicile of such Affiliate Reinsurer) falls below 125% Company Action Level
RBC, and is not increased to at least 125% within thirty (30) calendar days
after the date upon which the Grantor is required to provide to the
Beneficiary a report pursuant to any Reinsurance Agreement that would
reflect such deficiency;
(iii) the capital adequacy ratio (as currently calculated for Standard &
Poor's as set forth on Exhibit D), calculated quarterly, of consolidated
Scottish Re Group or consolidated Scottish Annuity & Life falls below 100%,
and is not increased to at least 100% within thirty (30) calendar days
after the date upon which the Reinsurer is required to provide to the
Company a report pursuant to any Reinsurance Agreement that would reflect
such deficiency;
(iv) there has been a material breach of any "Reinsurance Agreement" (as
defined in the Asset Purchase Agreement) by the Grantor or any Affiliated
Reinsurer of the Grantor, including, without limitation, failure to fund
any trust as required, and such breach has not been cured within thirty
(30) days after notice; or
(v) there has been a termination or amendment to any keepwell agreement
described in Section 5.26 of the Asset Purchase Agreement without the
Beneficiary's prior written consent, which consent shall not be
unreasonably withheld.
The term "Triggering Event Notice" shall have the meaning specified in
Section 3(a).
The term "Trustee" shall mean The Bank of New York.
The term "UCC" shall mean the New York Uniform Commercial Code.
The term "Valuation Dispute Notice" shall have the meaning specified in
Section 1(e).
The term "Valuation Report" shall have the meaning specified in Section
1(e).
17
The term "Withdrawal Notice" shall mean either a Grantor's Withdrawal
Notice or a Beneficiary's Withdrawal Notice.
Section 13. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York; provided that perfection issues with
respect to Article 9 of the UCC may give effect to applicable choice or conflict
of law rules set forth in Article 9 of the UCC.
Section 14. Successors and Assigns.
No Party may assign this Agreement or any of its obligations hereunder
without the prior written consent of the other Parties; provided, however, that
this Agreement shall inure to the benefit of and bind those who, by operation of
law, become successors to the Parties, including, without limitation, any
liquidator, rehabilitator, receiver or conservator and any successor, merged or
consolidated entity; and provided, further, that, in the case of the Trustee,
the successor trustee is eligible to be a trustee under the terms hereof.
Section 15. Severability.
In the event that any provision of this Agreement shall be declared invalid
or unenforceable by a court having jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remaining portions of this Agreement.
Section 16. Entire Agreement.
This Agreement constitutes the entire agreement among the parties hereto,
and there are no understandings or agreements, conditions or qualifications
regarding the obligations of the Trustee and the Securities Intermediary which
are not fully expressed in this Agreement.
Section 17. Amendments.
This Agreement may be modified or otherwise amended, and the observance of
any term of this Agreement may be waived, only if such modification, amendment
or waiver is in writing and signed by all of the Parties.
Section 18. Notices, etc.
Unless otherwise provided in this Agreement, all Communications (including,
without limitation, any Investment Orders or Instructions) required or permitted
to be given or made under the terms hereof shall be in writing and shall be
deemed to have been duly given or made (a) (i) when delivered personally, (ii)
when made or given by telecopier, or (iii) in the case of International Priority
Mail (Federal Express), upon the expiration of three days after any
Communication shall have been deposited in International Priority Mail (Federal
Express) for transmission or upon receipt thereof, whichever shall first occur
and (b) when addressed as follows:
18
To the Grantor:
Scottish Re Life (Bermuda) Limited
Crown House, Third Floor
4 Par-la-Ville Road
Hamilton, HM 12
BERMUDA
Attention: Paul Goldean
with a copy to:
Scottish Re Group Limited
Crown House, Third Floor
4 Par-la-Ville Road
Hamilton, HM 12
BERMUDA
Attention: Paul Goldean
and a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10005
Attention: Stephen G. Rooney
To the Beneficiary:
Security Life of Denver International Limited
Attention: Mark Tullis
c/o ING North America Insurance Corporation
5780 Powers Ferry Road NW
Atlanta, GA 30327
with a copy to:
B. Scott Burton
Corporate General Counsel
ING North America Insurance Corporation
5780 Powers Ferry Road NW
Atlanta, GA 30327
and
David A. Massey, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Ave., NW
Washington, DC 20004-2415
19
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Insurance Trust and Escrow Unit
If to the Securities Intermediary:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Insurance Trust and Escrow Unit
Each party may from time to time designate a different address for
Communications (including, without limitation, Investment Orders) by giving
written notice of such change to the other parties. All Communications relating
to the Beneficiary's approval of the Grantor's authorization to substitute
Assets and to the termination of the Security Trust Account shall be in writing.
Section 19. Headings.
The headings of the sections and the Table of Contents have been inserted
for convenience of reference only, and shall not be deemed to constitute a part
of this Agreement.
Section 20. Counterparts.
This Agreement may be executed in any number of counterparts, each of which
when so executed and delivered shall constitute an original, but such
counterparts together shall constitute one and the same Agreement.
20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SECURITY LIFE OF DENVER INTERNATIONAL LIMITED
By: /s/ David Pendergrass
---------------------------------------------
Name: David Pendergrass
Title: Vice President
SCOTTISH RE LIFE (BERMUDA) LIMITED
By: /s/ Elizabeth Murphy
--------------------------------------------
Name: Elizabeth Murphy
Title: CFO
THE BANK OF NEW YORK, AS SECURED PARTY AND TRUSTEE
By: /s/ Robert W. Rich
---------------------------------------------
Name: Robert W. Rich
Title: Vice President
THE BANK OF NEW YORK, AS SECURITIES INTERMEDIARY
By: /s/ Robert W. Rich
---------------------------------------------
Name: Robert W. Rich
Title: Vice President
21