TRUST AGREEMENT among THE ASSET SWAP COUNTERPARTY, THE CEDING INSURERS and as Beneficiaries and STONEHEATH RE, as Grantor and Beneficiary and THE BANK OF NEW YORK, as Trustee December 12, 2006
among
THE
ASSET SWAP COUNTERPARTY,
THE
CEDING INSURERS
and
as
Beneficiaries
and
STONEHEATH
RE,
as
Grantor and Beneficiary
and
THE
BANK OF NEW YORK,
as
Trustee
December
12, 2006
PREAMBLE
This
trust
agreement (the “Trust
Agreement”),
dated
as of December 12, 2006, is made and entered into by and among the ASSET SWAP
COUNTERPARTY, the CEDING INSURERS and XL CAPITAL LTD, a Cayman Islands exempted
company, as Beneficiaries, STONEHEATH RE, a Cayman Islands exempted company,
as
Grantor and Beneficiary, and THE BANK OF NEW YORK, a New York banking
corporation, not in its individual capacity but solely as Trustee.
ARTICLE
I
DEFINITIONS
“Account”
has
the
meaning ascribed to such term in Section 3.1 hereof.
“Actual
RO Coupon Payments”
means
the “Actual RO Coupon Payments” as such term is defined in, and determined in
accordance with the provisions of, the Asset Swap Agreement.
“Actual
RO Principal Repayments”
means
the “Actual RO Principal Repayments” as such term is defined in, and determined
in accordance with the provisions of, the Asset Swap Agreement.
“Asset”
means
an
asset in the Trust Account, including cash.
“Asset
Swap Agreement”
means
that certain 1992 ISDA Master Agreement (Multicurrency-Cross Border), as
supplemented by a schedule and confirmation thereto, dated as of the date
hereof, between the Grantor and the Asset Swap Counterparty, and as further
amended, supplemented or otherwise modified from time to time in accordance
with
the terms thereof and the terms of the Securities Issuance
Agreement.
“Asset
Swap Counterparty”
means
Xxxxxxx Xxxxx International as the initial Asset Swap Counterparty under the
Asset Swap Agreement and any permitted successor, assign or replacement
counterparty which assumes the obligations of the initial counterparty in
accordance with the terms thereof and the terms of the Securities Issuance
Agreement.
“Authorized
Representative”
has
the
meaning ascribed to such term in Section 3.16 hereof.
“Beneficiaries”
means
the Grantor and the Other Beneficiaries, for whose benefit the Trust hereunder
has been established. As used herein, the term “Beneficiaries” shall include any
respective permitted successor, assign or, in the case of the Asset Swap
Agreement and the Interest Rate Swap Agreement, replacement swap counterparty
of
the Asset Swap Counterparty, the Interest Rate Swap Counterparty, a Ceding
Insurer or XL Capital, including any liquidator, rehabilitator, receiver,
conservator or court-appointed successor-in-interest.
“Business
Day”
means
a
day on which commercial banks and foreign exchange markets settle payments
and
are open for general business (including dealings in foreign exchange and
foreign currency deposits) in Bermuda, the Cayman Islands, New York City and
London.
“Ceding
Insurers”
means
XLIB and any other insurance or reinsurance subsidiaries of XL Capital that
are
party to the Reinsurance Agreement from time to time.
“Confirmation”
means
the “Confirmation” as such term is defined in the Asset Swap
Agreement.
“Designated
Dealer”
means,
at any time, a dealer in securities of the type which constitute the Portfolio,
which shall be a third party designated by the Asset Swap
Counterparty.
“Eligible
Assets”
means
(i) debt securities with a term not to exceed forty years from the date of
investment or contractual commitment to invest therein issued or fully
guaranteed or insured by the United States government or any agency thereof;
(ii) commercial paper payable 183 days or less from the date of original
issuance and with a rating from Moody’s of “P-1” and from S&P of at least
“A-1” at the time of investment or contractual commitment to invest therein, and
not placed on watchlist for a possible downgrade by either Moody’s or S&P;
(iii) other debt securities with a final maturity not to exceed forty years
and
an average life not to exceed fifteen years from the date of investment or
contractual commitment to invest therein and with a rating from Moody’s of at
least “Aaa” and from S&P of at least “AAA” at the time of investment or
contractual commitment to invest therein; and (iv) money market funds rated
in
the highest investment category by Moody’s and S&P and whose distributions
to, or for the benefit of, the Grantor would not be subject to tax by any
jurisdiction; provided,
that (a)
such Eligible Assets shall be denominated in U.S. dollars and (b) any Eligible
Asset whose maturity exceeds six months shall bear interest at a rate that
is
determined from time to time by reference to a specified benchmark or
index.
“Exercise
Notice”
has
the
meaning ascribed to such term in Section 6.1 hereof.
“Extraordinary
Expenses”
has
the
meaning ascribed to such term in the Securities Issuance Agreement.
“Final
Redemption Date”
means
the date specified in the notice of redemption by the Grantor to the holders
of
record of the outstanding Issuer Preferred Securities following (i) the
termination of the Reinsurance Agreement (whether upon its expiry or as a result
of the occurrence of an early termination of the Securities Issuance Agreement)
and (ii) if required by the terms of the Reinsurance Agreement, the commutation
of the rights and obligations of the Grantor and the Ceding Insurers under
the
Reinsurance Agreement.
“Grantor”
means
Stoneheath Re, a Cayman Islands exempted company, which has established the
Trust hereunder for the sole benefit of itself and the Other Beneficiaries
as
set forth more fully herein.
2
“Initial
Permitted Investments”
has
the
meaning ascribed to such term in the Investment Guidelines.
“Interest
Rate Swap Agreement”
means
that certain long form transaction confirmation incorporating by reference
the
1992 ISDA Master Agreement (Multicurrency-Cross Border), dated as of the date
hereof, between the Grantor and the Interest Rate Swap Counterparty, as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and the terms of the Securities Issuance Agreement.
“Interest
Rate Swap Counterparty”
means
IXIS Financial Products Inc., as the initial counterparty under the Interest
Rate Swap Agreement, and any permitted successor, assign or replacement
counterparty which assumes the obligations of the initial counterparty in
accordance with the terms thereof and the terms of the Securities Issuance
Agreement.
“Investment
Account”
means
the account, number 348226, established for the benefit of the Beneficiaries
and
maintained in the name “The Bank of New York f/b/o Beneficiaries,” consisting of
the Investment Account Assets.
“Investment
Account Assets”
has
the
meaning ascribed to such term in Section 3.2 hereof.
“Investment
Guidelines”
means
the Investment Guidelines attached hereto as Exhibit A and made part of this
Trust Agreement.
“Investment
Notice”
means
a
written notice, substantially in the form attached hereto as Exhibit B, received
by the Trustee from the Asset Swap Counterparty or its Authorized Representative
in respect of an Asset.
“Issuer
Preferred Securities”
means
the non-cumulative perpetual preferred shares, liquidation preference U.S.
$1,000 per share, of the Grantor.
“Loss
Verification Agent”
means
the “Loss Verification Agent” under the Reinsurance Agreement.
“Moody’s”
means
Xxxxx’x Investors Service, Inc. or any successor thereto.
“Other
Beneficiaries”
means
the Asset Swap Counterparty, the Interest Rate Swap Counterparty, the Ceding
Insurers and XL Capital, for whose benefit the Trust hereunder has been
established as set forth more fully herein.
“Payment
Account”
means
the account, number 348227, established for the benefit of the Beneficiaries
and
maintained with the Trustee in the name “The Bank of New York f/b/o
Beneficiaries,” consisting of the Payment Account Assets.
“Payment
Account Assets”
has
the
meaning ascribed to such term in Section 3.3 hereof.
3
“Payment
Account Net Earnings”
has
the
meaning ascribed to such term in Section 3.3 hereof.
“Policy
Aggregate Limit”
means
the “Policy Aggregate Limit” as such term is defined in, and determined in
accordance with the provisions of, the Reinsurance Agreement.
“Policy
Repayments”
means
all amounts payable by the Ceding Insurers to the Grantor pursuant to the
Article entitled “Commutation and Quantum Dispute Resolution” of the Reinsurance
Agreement.
“Portfolio”
means
the “Portfolio” as such term is defined in, and determined in accordance with
the provisions of, the Asset Swap Agreement.
“Reference
Obligation”
means
each “Reference Obligation” as such term is defined in, and determined in
accordance with the provisions of, the Asset Swap Agreement.
“Reinsurance
Agreement”
means
that certain Excess of Loss Reinsurance Agreement, dated as of the date hereof,
between the Grantor and the Ceding Insurers, as amended, supplemented or
otherwise modified from time to time in accordance with the terms
thereof.
“Reinsurance
Premium”
means
the premium payable by the Ceding Insurers to the Grantor pursuant to the
Reinsurance Agreement.
“Reinvestment
Proceeds”
has
the
meaning ascribed to such term in the Investment Guidelines.
“Remaining
Aggregate Limit”
means,
on any date, an amount equal to the Policy Aggregate Limit as reduced as of
such
date by any payments made by the Grantor under the Reinsurance Agreement and
any
distributions from the Trust Account made to the Grantor to permit it to pay
Extraordinary Expenses.
“Repayment
Account”
has
the
meaning ascribed to such term in Section 3.1 hereof.
“Repayment
Account Assets”
means
the Repayment Cash Account Assets and the Returned Securities Account
Assets.
“Repayment
Cash Account”
means
the account, number 348228, established for the benefit of the Grantor and
XLIB,
as Beneficiaries, and maintained in the name “The Bank of New York f/b/o
Stoneheath Re and XL Insurance (Bermuda) Ltd,” consisting of the Repayment Cash
Account Assets, if any.
“Repayment
Cash Account Assets”
has
the
meaning ascribed to such term in Section 3.4 hereof.
4
“Repayment
Cash Account Net Earnings”
has
the
meaning ascribed to such term in Section 3.4 hereof.
“Repayment
Option”
has
the
meaning ascribed to such term in Section 6.1 hereof.
“Repayment
Option Period”
has
the
meaning ascribed to such term in Section 6.1 hereof.
“Returned
Securities Account”
means
the account, number 348229, established for the benefit of the Grantor and
XLIB,
as Beneficiaries, and maintained with the Trustee in the name “The Bank of New
York f/b/o Stoneheath Re and XL Insurance (Bermuda) Ltd,” consisting of the
Returned Securities Account Assets, if any.
“Returned
Securities Account Assets”
has
the
meaning ascribed to such term in Section 3.5 hereof.
“Returned
XL Preferred Securities”
has
the
meaning ascribed to such term in Section 3.6 hereof.
“RO
Termination Payments”
means
the “RO Termination Payments” as such term is used in, and determined in
accordance with the provisions of, the Asset Swap Agreement.
“S&P”
means
Standard & Poor’s Ratings Services, a Division of The XxXxxx-Xxxx Companies,
Inc., or any successor thereto.
“Securities
Issuance Agreement”
means
that certain Securities Issuance Agreement, dated as of the date hereof, among
the Grantor and XL Capital, as amended, supplemented or otherwise modified
from
time to time in accordance with the terms thereof.
“Securities
Return Period”
has
the
meaning ascribed to such term in Section 3.6 hereof.
“Specified
Distribution Date”
means
the date on which a distribution from the Payment Account is to be made to
a
Beneficiary. The Specified Distribution Date shall be set forth in the written
certification delivered by or on behalf of such Beneficiary pursuant to Section
5.3, 5.4, 5.5, 5.6, 5.7 or 5.8 hereof and shall not be earlier
than:
|
(i)
|
3
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to the Asset
Swap
Counterparty or its designee pursuant to Section 5.3 hereof;
|
|
(ii)
|
3
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to the Interest
Rate Swap Counterparty or its designee pursuant to Section 5.4 hereof;
|
5
|
(iii)
|
20
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to a Ceding
Insurer
or its designee pursuant to Section 5.5 hereof;
|
|
(iv)
|
10
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to XLIB or
its
designee pursuant to Section 5.6 hereof;
|
|
(v)
|
3
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to XL Capital
or
its designee pursuant to Section 5.7 hereof;
and
|
|
(vi)
|
10
Business Days from the date on which the written certification was
delivered to the Trustee in the case of a distribution to the Grantor
or
its designee pursuant to Section 5.8
hereof.
|
In
the
case of a distribution of Payment Account Net Earnings to XL Capital or its
designee pursuant to Section 5.7 hereof, the Specified Distribution Date shall
also be a date on which the holders of outstanding Issuer Preferred Securities
are paid all accrued (but unpaid) dividends on the Issuer Preferred Securities
in respect of the period from and including the immediately preceding dividend
payment date (or the date of original issuance if there has not been a dividend
payment date) to but excluding such date.
“Temporary
Repayment Cash Account Net Earnings”
has
the
meaning ascribed to such term in Section 6.2(b).
“Termination
Date”
has
the
meaning ascribed to such term in Section 8.1(a) hereof.
“Trust”
has
the
meaning ascribed to such term in Section 2.1 hereof.
“Trust
Account”
has
the
meaning ascribed to such term in Section 3.1 hereof.
“XL
Capital”
means
XL
Capital Ltd, a Cayman Islands exempted company, and its permitted successors
and
assigns.
“XLIB”
means
XL
Insurance (Bermuda) Ltd, a Bermuda exempted limited liability company, and
its
permitted successors and assigns.
“XL
Preferred Securities”
means
Series D Preference Ordinary Shares, liquidation preference U.S. $1,000 per
share, of XL Capital which may be issued and delivered to the Grantor from
time
to time under the Securities Issuance Agreement.
6
ARTICLE
II
ESTABLISHMENT
OF TRUST
Section
2.1. Establishment
of Trust.
By
execution of this Trust Agreement, the Grantor hereby establishes a trust (the
“Trust”)
for the
sole benefit of the Beneficiaries as set forth more fully herein.
ARTICLE
III
CREATION
OF TRUST ACCOUNT AND DEPOSITS
Section
3.1. Establishment
of Accounts.
The
Grantor hereby agrees to establish and maintain with the Trustee the Investment
Account, the Payment Account, the Repayment Cash Account and the Returned
Securities Account. Each of the Investment Account, the Payment Account, the
Repayment Cash Account and the Returned Securities Account shall be maintained
separately from any other Account maintained with the Trustee, and the Assets
in
each Account shall be segregated from the Assets in any other Account. Each
of
the Investment Account, the Payment Account, the Repayment Cash Account and
the
Returned Securities Account, including any successor account or accounts
thereto, is referred to herein as an “Account”
and
the
Accounts are collectively referred to herein as the “Trust
Account.”
The
Repayment Cash Account and the Returned Securities Account, including any
successor account or accounts thereto, are collectively referred to herein
as
the “Repayment
Account.”
Each
Account shall form part of the Trust created hereunder.
Section
3.2. Investment
Account Assets.
The
Assets in the Investment Account (the “Investment
Account Assets”)
shall
consist of (i) cash deposited by the Grantor pursuant to Section 3.6 hereof,
(ii) Assets transferred from the Payment Account to the Investment Account
in
accordance with Section 3.7 hereof, (iii) Assets acquired in connection with
the
investment and reinvestment of Investment Account Assets in accordance with
Section 4.1 hereof and (iv) the net earnings, if any, on the foregoing. The
Trustee shall transfer Investment Account Assets from the Investment Account
to
the Payment Account from time to time in accordance with Section 5.1 whereupon
such transferred Investment Account Assets shall constitute Payment Account
Assets. The Trustee shall not, under any circumstance, transfer Investment
Account Assets to the Repayment Account or otherwise transfer Investment Account
Assets to the Payment Account.
Section
3.3. Payment
Account Assets.
The
Assets in the Payment Account (the “Payment
Account Assets”)
shall
consist of (i) cash deposited by the Asset Swap Counterparty pursuant to Section
3.7 hereof, (ii) cash deposited by the Interest Rate Swap Counterparty pursuant
to Section 3.8 hereof, (iii) cash deposited by the Ceding Insurers pursuant
to
Section 3.9 hereof (other than Policy Repayments), (iv) cash deposited by XL
Capital pursuant to Section 3.10 hereof, (v) Assets transferred from the
Investment Account to the Payment Account in accordance with Section 3.2 hereof,
(vi) Assets acquired in connection with the investment and reinvestment of
Payment Account Assets in accordance with Section 4.2 hereof and (vii) the
net
7
earnings
(the “Payment
Account Net Earnings”),
if
any, on the foregoing. The Trustee shall transfer Payment Account Assets from
the Payment Account to the Investment Account from time to time in accordance
with Section 3.7 hereof whereupon such Payment Account Assets shall constitute
Investment Account Assets. The Trustee shall not, under any circumstance,
transfer Payment Account Assets to the Repayment Account or otherwise transfer
Payment Account Assets to the Investment Account.
Section
3.4. Repayment
Cash Account Assets.
The
Assets in the Repayment Cash Account (the “Repayment
Cash Account Assets”),
if
any, shall consist of (i) the Policy Repayments deposited by the Ceding Insurers
pursuant to Section 3.9 hereof, (ii) Assets acquired in connection with the
investment and reinvestment of Repayment Cash Account Assets in accordance
with
Section 4.2 hereof and (iii) the net earnings (the “Repayment
Cash Account Net Earnings”),
if
any, on the foregoing. The Trustee shall not, under any circumstance, transfer
Repayment Cash Account Assets to any other Account. Except for the Grantor
and
XLIB, none of the Beneficiaries shall have any claim, interest or right
hereunder or otherwise in the Repayment Cash Account Assets.
Section
3.5. Returned
Securities Account Assets.
The
Assets in the Returned Securities Account (the “Returned
Securities Account Assets”),
if
any, shall consist of (i) the Returned XL Preferred Securities deposited by
the
Grantor pursuant to Section 3.6 and Section 6.1 hereof and (ii) dividends and
other payments, if any, paid on the Returned XL Preferred Securities
(irrespective of when declared) while such Returned XL Preferred Securities
are
in the Returned Securities Account. The Trustee shall not, under any
circumstance, transfer Returned Securities Account Assets to any other Account.
Except for the Grantor and XLIB, none of the Beneficiaries shall have any claim,
interest or right hereunder or otherwise in the Returned Securities Account
Assets.
Section
3.6. Deposits
by the Grantor.
On the
date hereof, the Grantor shall deposit into the Investment Account an amount
of
cash that is equal to the gross proceeds to the Grantor from the issuance of
Issuer Preferred Securities on the date hereof. In addition, upon receipt by
the
Grantor of a written notice that the Ceding Insurers have deposited Policy
Repayments into the Repayment Cash Account pursuant to Section 3.9 hereof,
the
Grantor shall have the option, exercisable during the period commencing on
the
date of receipt of such written notice and ending at 5 p.m., New York time,
on the tenth Business Day thereafter (the “Securities
Return Period”),
to
deposit into the Returned Securities Account an amount of XL Preferred
Securities having an aggregate liquidation preference that, when added to the
accrued and unpaid dividends on such XL Preferred Securities for the
then-current dividend period, is equal to the aggregate amount of Policy
Repayments deposited in the Repayment Cash Account by the Ceding Insurers (the
“Returned
XL Preferred Securities”).
Section
3.7. Deposits
by the Asset Swap Counterparty.
From
time to time after the date hereof, the Asset Swap Counterparty shall deposit
into the Payment Account, on behalf of the Grantor, any amounts that are paid
by
the Asset Swap Counterparty to the Grantor under the Asset Swap Agreement.
The
Trustee shall transfer from the Payment Account to the Investment Account any
RO
Termination Payments that are deposited in the Payment Account
8
pursuant
to this Section 3.7 to the extent that such amounts are to be used by the
Trustee to acquire an Asset pursuant to the Investment Guidelines and any
Investment Notice received from the Asset Swap Counterparty.
Section
3.8. Deposits
by the Interest Rate Swap Counterparty.
The
Interest Rate Swap Counterparty has been instructed by the Grantor to deposit,
from time to time after the date hereof, into the Payment Account any amounts
that are paid by the Interest Rate Swap Counterparty to the Grantor under the
Interest Rate Swap Agreement.
Section
3.9. Deposits
by the Ceding Insurers.
From
time to time after the date hereof, the Ceding Insurers shall deposit into
the
Payment Account, on behalf of the Grantor, any Reinsurance Premiums that are
paid to the Grantor under the Reinsurance Agreement. In addition, to the extent
that any Policy Repayments are paid to the Grantor under the Reinsurance
Agreement, the Ceding Insurers shall deposit such Policy Repayments, on behalf
of the Grantor, into the Repayment Cash Account.
Section
3.10. Deposits
by XL Capital.
From
time to time after the date hereof, XL Capital shall deposit into the Payment
Account, on behalf of the Grantor, any amounts that are paid by XL Capital
to
the Grantor under the Securities Issuance Agreement (other than amounts payable
pursuant to Section 3.3 of the Securities Issuance Agreement, which amounts
shall not be deposited into the Trust Account).
Section
3.11. Requirements
for Deposits.
All
deposits into the Trust Account (other than Returned XL Preferred Securities,
if
any, deposited pursuant to Sections 3.6 and Section 6.1 hereof) shall be in
U.S.
dollars and shall be made by wire transfer of immediately available funds to
such account as may be specified by the Trustee in writing from time to time.
Any deposit of Returned XL Preferred Securities by the Grantor shall be made
by
delivering to the Trustee certificates evidencing such Returned XL Preferred
Securities in negotiable and proper deliverable form or accompanied by a duly
executed stock power, in blank, bearing the signature of the
transferor.
Section
3.12. Access
to Trust Account Information.
The
Beneficiaries will be given real-time access to all information with respect
to
the Trust Account through the Trustee’s electronic account system.
Section
3.13. Payments
by Guarantors.
For the
purposes of this Trust Agreement, any reference to a payment that is made by
a
specified person shall include any payment that is made by a guarantor of such
specified person pursuant to a guarantee or by any other person that makes
a
payment for or on behalf of such specified person.
Section
3.14. Grant
of Trust Power.
The
Grantor hereby grants to the Trustee all trust powers necessary and reasonable
in the performance of its duties and obligations hereunder.
Section
3.15. Purpose
of Trust.
The
Assets in the Trust Account shall be held by the Trustee for the sole use and
benefit of the Beneficiaries as provided for herein.
9
Section
3.16. Designation
of Agents.
Except
as otherwise expressly provided in this Trust Agreement, any statement,
certificate, notice, request, consent, approval, or other instrument to be
delivered or furnished by a Beneficiary, as the case may be, shall be
sufficiently executed if executed in the name of such Beneficiary by such
officer or officers of such Beneficiary, or by such other agent or agents of
such Beneficiary, as may be designated in a resolution or letter of advice
by
such Beneficiary (each such person, an “Authorized
Representative”).
Written notice of such designation by such Beneficiary shall be filed with
the
Trustee. The Trustee shall be protected in acting upon any written statement
or
other instrument made by such Authorized Representative of such Beneficiary
with
respect to the authority conferred on such person; provided,
that
each Beneficiary or its Authorized Representative may only represent its own
respective interest.
Section
3.17. No
Other Conditions or Qualifications.
This
Trust Agreement and the enforceability hereof are not subject to any conditions
or qualifications not expressly included herein.
ARTICLE
IV
MAINTENANCE
OF THE TRUST ACCOUNT
Section
4.1. Administration
of Investment Account by the Trustee.
The
Investment Account Assets shall be invested in accordance with the Investment
Guidelines and any Investment Notice received by the Trustee from the Asset
Swap
Counterparty or its Authorized Representative, and the Trustee is hereby
authorized and instructed to act in accordance with such Investment Guidelines
and Investment Notice. Except as otherwise provided by this Trust Agreement,
including the Investment Guidelines, or by any Investment Notice received from
the Asset Swap Counterparty or its Authorized Representative, the Trustee shall
not be required or permitted to take any action with respect to the investment
or reinvestment of the Investment Account Assets. Subject to Section 7.4 hereof,
any loss on an investment made pursuant to this Section 4.1 shall be borne
exclusively by the Investment Account and the Trustee shall not be liable for
such loss.
Section
4.2. Administration
of the Payment Account and the Repayment Account by the Trustee.
The
Payment Account Assets and, if applicable, the Repayment Cash Account Assets
shall be invested in accordance with any written notices received by the Trustee
from XL Capital or its Authorized Representative, and the Trustee is hereby
authorized and instructed to act in accordance with such written notices. Any
investment of Payment Account Assets or Repayment Cash Account Assets shall
be
made in financial instruments selected from time to time by XL Capital which
(x)
satisfy the criteria set forth in clauses (ii) and (iv) and the proviso (a)
of
the definition of Eligible Assets and (y) are capable of being liquidated within
one Business Day of the receipt by the Trustee of a written notice from XL
Capital. Investments made pursuant to this Section 4.2 shall not be deemed
Reference Obligations for the purpose of the Asset Swap Agreement, and the
Portfolio shall not be modified to reflect such investments. Except as otherwise
provided by this Trust Agreement or by any written notice received by the
Trustee from XL Capital, the Trustee shall not be required or permitted to
take
any action with
10
respect
to
the investment or reinvestment of the Payment Account Assets and, if applicable,
the Repayment Cash Account Assets. Subject to Section 7.4 hereof, any loss
on an
investment made pursuant to this Section 4.2 shall be borne exclusively by
the
Payment Account or the Repayment Cash Account, as applicable, and the respective
Beneficiaries thereof and the Trustee shall not be liable for such
loss.
Section
4.3. Voting
and Redemption of Securities.
The
Trustee shall exercise the right to vote with respect to any Investment Account
Assets solely as directed by the Asset Swap Counterparty and, if the Trustee
does not receive any direction from the Asset Swap Counterparty with respect
to
any vote, abstain from such vote. The Trustee shall exercise the right to vote
with respect to any Payment Account Assets and any Repayment Cash Account Assets
solely as directed by XL Capital and, if the Trustee does not receive any
direction from XL Capital with respect to any vote, abstain from such vote.
The
Trustee shall exercise the right to vote with respect to the Returned XL
Preferred Securities, if any, in the Returned Securities Account solely as
directed by the Grantor and, if the Trustee does not receive any direction
from
the Grantor with respect to any vote, abstain from such vote. The Trustee shall
exercise any right to redeem Returned XL Preferred Securities in the Returned
Securities Account, if any, solely as directed by the Grantor and if the Trustee
does not receive any direction from the Grantor with respect to any such
redemption right, abstain from exercising such redemption right.
Section
4.4. Books
and Records
.
The
Trustee shall keep full and complete records of the administration of the Trust
Account and each Account. Each of the Beneficiaries may, with reasonable prior
notice, examine such Trust Account and Account records during business hours
through any person or persons duly authorized in writing by such
Beneficiary.
Section
4.5. Disclosure
of Interests.
Each
Beneficiary hereby authorizes the Trustee to disclose its respective name,
address and interest in the Assets in the Trust Account if and to the extent
that such disclosure is required by law.
ARTICLE
V
DISTRIBUTIONS
FROM THE PAYMENT ACCOUNT
Section
5.1. Distributions
Generally.
(a)
Except as provided in Sections 5.2, 6.2 and 6.3 hereof, all distributions from
the Trust Account shall be made from the Payment Account and shall be subject
to
Section 5.9 hereof. If the Payment Account does not have sufficient Assets
to
fund a distribution that is required to be made pursuant to Section 5.2,
5.3, 5.4, 5.5, 5.6, 5.7 or 5.8 hereof, the Trustee shall (i) transfer cash
from
the Investment Account to the Payment Account or (ii) liquidate one or more
Investment Account Assets in accordance with Section 4.1 hereof (but only to
the
extent that such liquidation is necessary to generate funds for any such
distribution or distributions) and transfer such liquidation proceeds to the
Payment Account. In the case of a distribution to be made to the Grantor
pursuant to Section 5.8 hereof in order to permit the Grantor to pay
Extraordinary Expenses stated by the Grantor to be due and payable, the Trustee
shall (x) liquidate one or more Investment Account Assets in accordance
11
with
Section 4.1 hereof (but only to the extent that such liquidation is necessary
to
generate funds for such distribution), (y) transfer any proceeds from such
liquidation to the Payment Account and (z) make such distribution to the Grantor
solely from such liquidation proceeds.
Section
5.2. Distributions
to the Trustee.
The
Trustee may from time to time make distributions from the Payment Account to
itself in order to satisfy any obligations that are then due and payable to
it
pursuant to Section 7.11 hereof; provided,
that the
Trustee has previously sought but not obtained payment from the Grantor and
XL
Capital and any grace periods for the payment of such obligations have expired.
If after all Assets have been distributed from the Payment Account (after giving
effect to a liquidation of Investment Account Assets and the transfer of the
proceeds from such liquidation to the Payment Account pursuant to Section 5.1
hereof) any obligations that are then due and payable to the Trustee pursuant
to
Section 7.11 hereof remain unsatisfied, the Trustee may make such further
distributions to itself from the Repayment Account as are necessary to satisfy
such remaining obligations; provided,
that the
Trustee has previously sought but not obtained payment from the Grantor or
XL
Capital and any grace periods for the payment of such obligations have expired.
The Trustee shall notify each of the Beneficiaries in writing at least five
Business Days prior to making a distribution pursuant to this Section
5.2.
Section
5.3. Distributions
from the Payment Account to the Asset Swap Counterparty.
The
Asset Swap Counterparty may, by delivering via facsimile a written certification
substantially in the form attached hereto as Exhibit C to the Trustee and a
copy
of such written certification to each other Beneficiary, from time to time
request a distribution from the Payment Account in order to satisfy any
obligations stated by the Asset Swap Counterparty to be due and payable
(irrespective of whether any grace periods applicable thereto have expired)
on
the Specified Distribution Date by the Grantor to the Asset Swap Counterparty
under the Asset Swap Agreement. The Trustee shall, subject to Section 5.9
hereof, distribute the requested amount to the Asset Swap Counterparty or its
designee on the Specified Distribution Date.
Section
5.4. Distributions
from the Payment Account to the Interest Rate Swap Counterparty.
The
Interest Rate Swap Counterparty may, by delivering via facsimile a written
certification in the form customarily produced in accordance with its internal
procedures to the Trustee and a copy of such written certification to each
other
Beneficiary, from time to time request a distribution from the Payment Account
in order to satisfy any obligations stated by the Interest Rate Swap
Counterparty to be due and payable (irrespective of whether any grace periods
applicable thereto have expired) on the Specified Distribution Date by the
Grantor to the Interest Rate Swap Counterparty under the Interest Rate Swap
Agreement. The Trustee shall, subject to Section 5.9 hereof, distribute the
requested amount to the Interest Rate Swap Counterparty or its designee on
the
Specified Distribution Date.
Section
5.5. Distributions
from the Payment Account to the Ceding Insurers.
Any
Ceding Insurer may, by delivering via facsimile a written certification
substantially in the form attached hereto as Exhibit C to the Trustee and a
copy
of such written certification to each other Beneficiary, from time to time
request a distribution from the Payment Account in order to satisfy any
obligations stated by the Ceding Insurer to be due and payable (irrespective
of
12
whether
any grace periods applicable thereto have expired) on the Specified Distribution
Date by the Grantor to the Ceding Insurer under the Reinsurance Agreement;
provided,
in each
case, that (i) such written certification certifies that (a) the distribution
will not result in the total amount of funds distributed from the Trust Account
pursuant to this Section 5.5 and Section 5.6 hereof exceeding, in the aggregate,
$350,000,000 as of the time of distribution and (b) there has not been commenced
any winding up, liquidation or insolvency-related reorganization of XL Capital
and (ii), if the distribution is requested in respect of a claim under the
Reinsurance Agreement, a copy of the quarterly or interim report or the
commutation report relating to such claim is attached to the written
certification. The Trustee shall, subject to Section 5.9 hereof, distribute
the
requested amount to the Ceding Insurer or its designee on the Specified
Distribution Date, but only against the concurrent issuance and delivery to
the
Grantor by XL Capital of an amount of XL Preferred Securities having an
aggregate liquidation preference that is equal to the amount of funds so
distributed. Any written certification to be delivered by a Ceding Insurer
hereunder may be executed and delivered on its behalf by XLIB.
Section
5.6. Distributions
from the Payment Account to XLIB.
XLIB
may, by delivering via facsimile a written certification substantially in the
form attached hereto as Exhibit C to the Trustee and a copy of such written
certification to each other Beneficiary, request a distribution from the Payment
Account to fund amounts stated to be due and payable (irrespective of whether
any grace periods applicable thereto have expired) to XLIB or its designee
on
the Specified Distribution Date against the issuance and delivery of XL
Preferred Securities to the Grantor pursuant to Sections 2.2(a)(ii) and 2.3(a)
of the Securities Issuance Agreement; provided,
in each
case, that such written certification certifies that (i) the distribution will
not result in the total amount of funds distributed from the Trust Account
pursuant to Section 5.5 hereof and this Section 5.6 exceeding, in the aggregate,
$350,000,000 as of the time of distribution and (ii) there has not been
commenced any winding up, liquidation or insolvency-related reorganization
of XL
Capital. The Trustee shall, subject to Section 5.9 hereof, distribute the
requested amount to XLIB or its designee on the Specified Distribution Date,
but
only against the concurrent issuance and delivery to the Grantor by XL Capital
of an amount of XL Preferred Securities having an aggregate liquidation
preference that is equal to the amount of funds so distributed.
Section
5.7. Distributions
from the Payment Account to XL Capital.
XL
Capital may, by delivering via facsimile a written certification substantially
in the form attached hereto as Exhibit C to the Trustee and a copy of such
written certification to each other Beneficiary, from time to time request
a
distribution from the Payment Account (i) in order to satisfy any obligations
stated by XL Capital to be due and payable (irrespective of whether any grace
periods applicable thereto have expired) on the Specified Distribution Date
by
the Grantor to XL Capital under Section 3.4 of the Securities Issuance Agreement
or (ii) of Payment Account Net Earnings. The Trustee shall, subject to Section
5.9 hereof and the limitation set forth in the immediately succeeding sentence,
distribute the requested amount to XL Capital or its designee on the Specified
Distribution Date. Any distribution of Payment Account Net Earnings to XL
Capital pursuant to this Section 5.7 shall be limited to the Payment Account
Net
Earnings in the Payment Account on the Specified Distribution Date after any
distributions that are required to
13
be
made to
the Trustee, the Asset Swap Counterparty, the Interest Rate Swap Counterparty,
the Ceding Insurers and XLIB, or any of them, on the Specified Distribution
Date
have been made.
Section
5.8. Distributions
from the Payment Account to the Grantor.
The
Grantor may, by delivering via facsimile a written certification substantially
in the form attached hereto as Exhibit C to the Trustee and a copy of such
written certification to each other Beneficiary, from time to time request
a
distribution from the Payment Account in order to (i) pay any Extraordinary
Expenses stated by the Grantor to be due and payable (irrespective of whether
any grace periods applicable thereto have expired) on the Specified Distribution
Date or (ii) make payments on the Issuer Preferred Securities on the Specified
Distribution Date in accordance with their terms, as in effect on the date
hereof. The Trustee shall, subject to Section 5.9 hereof, distribute the
requested amount to the Grantor or its designee on the Specified Distribution
Date.
Section
5.9. Priority
of Distributions from the Payment Account.
If two
or more distributions from the Payment Account are to be made on the same date,
the Trustee shall make such distributions in the following order of priority:
first,
to the
Trustee pursuant to Section 5.2 hereof; second,
to the
Asset Swap Counterparty or its designee pursuant to Section 5.3 hereof;
third,
to the
Interest Rate Swap Counterparty or its designee pursuant to Section 5.4 hereof;
fourth,
to the
Ceding Insurers or their respective designees pursuant to Section 5.5 hereof;
fifth,
to XLIB
or its designee pursuant to Section 5.6 hereof; sixth,
to XL
Capital or its designee pursuant to Section 5.7 hereof; and, seventh,
to the
Grantor or its designee pursuant to Section 5.8 or 8.1(b) hereof.
ARTICLE
VI
DISTRIBUTIONS
FROM THE REPAYMENT ACCOUNT
Section
6.1. Repayment
Option.
The
Grantor shall have the option to deposit the full amount of Returned XL
Preferred Securities into the Returned Securities Account at any time during
the
Securities Return Period. If at the time of expiration of the Securities Return
Period the Grantor has not deposited the full amount of Returned XL Preferred
Securities into the Returned Securities Account, the Trustee shall distribute
all Repayment Cash Account Assets to XLIB or its designee on the first Business
Day following the expiration of the Securities Return Period. If the Grantor
deposits the full amount of Returned XL Preferred Securities into the Returned
Securities Account at any time during the Securities Return Period, the Grantor
shall have the option (the “Repayment
Option”),
exercisable during the period commencing on the first date on which the Ceding
Insurers deposited the full amount of the Policy Repayments into the Repayment
Cash Account and ending at 5 p.m., New York time, on the tenth Business Day
thereafter (the “Repayment
Option Period”),
to
receive a distribution of either (i) all the Returned Securities Account Assets
in the Returned Securities Account at the time of the distribution or (ii)
all
Repayment Cash Account Assets in the Repayment Cash Account at the time of
the
distribution. The Grantor may exercise the Repayment Option at any time during
the Repayment Option Period by delivering a written notice (an “Exercise
Notice”)
to the
Trustee
14
(with
a
copy to XLIB) stating that the Grantor has exercised the Repayment Option and
the type of distribution that the Grantor has elected to receive.
Section
6.2. Distributions
Prior to the Exercise of the Repayment Option.
(a) The
Trustee shall, subject to Section 6.4 hereof, promptly following the receipt
thereof distribute to the Grantor all dividends, if any, paid on the Returned
XL
Preferred Securities (irrespective of when declared) while such Returned XL
Preferred Securities are in the Returned Securities Account. Upon making any
distribution to the Grantor pursuant to this Section 6.2(a), the Trustee shall,
subject to Section 6.4 hereof, contemporaneously distribute to XLIB or its
designee all Repayment Cash Account Net Earnings, if any, in the Repayment
Cash
Account at the time of the distribution.
(b) If
during
the Repayment Option Period all or a portion of the Returned XL Preferred
Securities in the Returned Securities Account are redeemed in accordance with
their terms, the Trustee shall, subject to Section 6.4 hereof, promptly
following the receipt thereof distribute to the Grantor the full redemption
price (including any accrued dividends) paid on the Returned XL Preferred
Securities so redeemed. Upon making any distribution to the Grantor pursuant
to
this Section 6.2(b), the Trustee shall, subject to Section 6.4 hereof,
contemporaneously distribute to XLIB or its designee an amount of Repayment
Cash
Account Assets that is equal to the sum of (i) the aggregate liquidation
preference of the Returned XL Preferred Securities redeemed in connection with
the distribution to the Grantor and (ii) the Temporary Repayment Cash Account
Net Earnings as determined and notified to the Trustee by XLIB. For purposes
of
this Trust Agreement, “Temporary
Repayment Cash Account Net Earnings”
means
an
amount of Repayment Cash Account Net Earnings that is equal to the product
of
(a) the Repayment Cash Account Net Earnings in the Repayment Cash Account at
the
time of the distribution to XLIB or its designee multiplied by (b) a fraction,
the numerator of which is the aggregate liquidation preference of the Returned
XL Preferred Securities redeemed in connection with the distribution to the
Grantor and the denominator of which is the aggregate liquidation preference
of
all of the Returned XL Preferred Securities in the Returned Securities Account
immediately prior to such redemption.
(c) Subject
to
Section 6.4 hereof, any distribution pursuant to this Section 6.2 to the Grantor
or its designee or to XLIB or its designee shall be made free and clear of
any
claim by any other person.
Section
6.3. Distributions
following the Exercise of the Repayment Option.
Within
one Business Day of receiving a completed Exercise Notice from the Grantor,
the
Trustee shall, subject to Section 6.4 hereof, make a distribution from the
Repayment Account to the Grantor or its designee in accordance with the election
made by the Grantor in the Exercise Notice. If by the expiration of the
Repayment Option Period the Trustee shall not have received a properly completed
Exercise Notice from the Grantor, (i) the Grantor shall be deemed to have
elected to receive a distribution from the Returned Securities Account
consisting of all Returned Securities Account Assets at the time of the
distribution and (ii) the Trustee shall, subject to Section 6.4 hereof, make
a
distribution on the first Business Day following the expiration of the
15
Repayment
Option Period to the Grantor or its designee in accordance with such deemed
election. Upon making any distribution to the Grantor pursuant to this Section
6.3, the Trustee shall, subject to Section 6.4 hereof, contemporaneously
distribute all other Repayment Account Assets in the Repayment Account at the
time of the distribution to XLIB or its designee. Subject to Section 6.4 hereof,
any distribution pursuant to this Section 6.3 to the Grantor or its designee
or
to XLIB or its designee shall be made free and clear of any claim by any other
person.
Section
6.4. Priority
of Distributions from the Repayment Account.
If the
Trustee is to make a distribution from the Repayment Account to itself pursuant
to Section 5.2 hereof on any date on which a distribution from the Repayment
Account is also to be made to the Grantor or its designee or XLIB or its
designee pursuant to Section 6.2 or Section 6.3 hereof, the Trustee shall make
such distributions, first,
to the
Trustee and, second,
to XLIB
or its designee and, if applicable, to the Grantor or its designee. Any
distribution from the Repayment Account to the Trustee pursuant to this Section
6.4 shall be made equally out of the Repayment Cash Account Assets and the
Returned Securities Account Assets.
ARTICLE
VII
RIGHTS
AND DUTIES OF THE TRUSTEE
Section
7.1. Acceptance
of Assets by the Trustee.
The
Trustee shall not accept any Assets for deposit into the Trust Account (other
than cash) unless such Assets are issued or registered in such form that they
are readily negotiable to the Trustee. For the purposes of the preceding
sentence, Assets that are either issued in “bearer” form or issued or registered
in the name of the Trustee or its nominee shall be deemed to be in such
negotiable form or specifically endorsed by the Grantor to the Trustee in blank.
Any Assets received by the Trustee that are not in such proper negotiable form
shall not be accepted by the Trustee and shall be returned to the appropriate
person as unacceptable. In no case shall any Asset to be credited to the Trust
Account be registered in the name of the Grantor, payable to the order of the
Grantor or specially endorsed to the Grantor except to the extent the foregoing
have been specially endorsed by the Grantor to the Trustee or in blank.
Section
7.2. Collection
of Interest, Dividends and Other Investment Income.
The
Trustee is hereby authorized, without prior direction from, or notice to, any
of
the Beneficiaries to demand payment of and collect all interest payments and
other investment income on the Assets comprising the Trust Account, if any.
The
Trustee shall initially (i) deposit all interest payments and other investment
income on Investment Account Assets into the Investment Account, (ii) all
interest payments and other investment income on Payment Account Assets into
the
Payment Account, (iii) all interest payments and other investment income on
Repayment Cash Account Assets into the Repayment Cash Account and (iv) all
dividend payments and other investment income on Returned Securities Account
Assets into the Returned Securities Account.
Section
7.3. Obligations
of the Trustee.
The
Trustee agrees to hold, transfer and distribute Assets in the Trust Account
in
accordance with the provisions expressed herein.
16
Section
7.4. Responsibilities
of Trustee.
The
Trustee, in the administration of this Trust Account, shall be bound solely
by
the express provisions herein, the written notices and certifications
contemplated hereby and such further directions as the appropriate party or
parties may, under the conditions herein provided, deliver to the Trustee.
The
Trustee shall be under no obligation to enforce the Grantor’s obligations under
this Trust Agreement, except as otherwise expressly provided or directed
pursuant hereto. The Trustee’s responsibilities shall be limited to the safe
holding of the Assets comprising the Trust Account, and the Trustee shall be
liable only for its own negligence, willful misconduct, lack of good faith
or
breaches of fiduciary duties or express obligations under this Trust Agreement.
The Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Trust Agreement, and no implied covenants or
obligations shall be read into this Trust Agreement against the Trustee.
Section
7.5. Consultation
with Counsel.
The
Trustee may consult with counsel selected by it, who may be counsel for a
Beneficiary. If such counsel is not an employee of the Trustee, the Grantor
or
any of the Other Beneficiaries, the reasonable fees and expenses of such counsel
shall be jointly and severally borne by the Grantor and XL Capital. The opinion
of said counsel 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 said counsel.
Section
7.6. Monthly
Report, Etc.
(a)The
Trustee shall provide an activity report to the Beneficiaries upon inception
of
the Trust Account and within five Business Days following the end of each month,
which report shall, in reasonable detail, show with respect to each of the
Investment Account, the Payment Account and the Repayment Account (i) all
deposits, distributions, transfers and substitutions during such month; (ii)
a
listing of securities held and cash and cash equivalent balances as of the
day
of such report; (iii) the fair market value of each Asset held in such Account
(other than cash held in U.S. dollars) and the amount of cash held in U.S.
dollars as of the day of such report; and (iv) the cost basis of each Asset
held
in such Account (other than cash held in U.S. dollars). The Trustee further
agrees to forward upon request to the Beneficiaries a certified list and
valuation of all Assets held under this Trust Agreement.
(b) The
Trustee shall utilize the services of a nationally recognized reporting service
in order to determine the fair market value of any Assets in the Trust Account
(other than cash held in United States dollars) on a monthly basis, and the
Beneficiaries shall accept and agree to such values absent manifest error;
provided,
that
such values are to be stated in United States dollars. The Trustee shall notify
the Beneficiaries of the identity of the reporting service utilized by the
Trustee for such purpose.
(c) The
Trustee shall, promptly following receipt by the Trustee, send to the Asset
Swap
Counterparty and XL Capital copies of any notices, reports or information that
the Trustee receives concerning any security then being held as part of the
Portfolio, including, information concerning any unscheduled payment the Trustee
receives in respect of any such security.
17
(d) The
Trustee shall, if requested by the Asset Swap Counterparty, request copies
of
any notices, reports or information with respect to any security then being
held
as part of the Portfolio which the Asset Swap Counterparty would be entitled
to
receive if such security were held by the Asset Swap Counterparty.
Section
7.7. Resignation
or Removal of the Trustee.
(a)Subject
to
clause (b) below, the Trustee may, at any time, resign from, and terminate
its
capacity hereunder by providing at least ninety days’ prior written notice to
the Beneficiaries. The Grantor may remove the Trustee by providing at least
ninety days’ prior written notice of such removal to the Trustee, provided
that such
removal is consented to in writing by each of the Other Beneficiaries (who
may
not unreasonably withhold or delay their consent). A resignation or removal
of
the Trustee shall not become effective until a successor to the Trustee shall
have been duly appointed and approved by the Beneficiaries or by a court
pursuant to Section 7.7(b) hereof and all Assets held within the Trust Account
have been duly transferred to such successor.
(b) The
Grantor, upon receiving a notice of resignation from the Trustee or delivering
a
notice of removal to the Trustee, shall promptly appoint a successor trustee
acceptable to the Other Beneficiaries, by written instrument, copies of which
instrument shall be delivered to the retiring Trustee, the Other Beneficiaries
and the successor trustee. If no successor trustee shall have been appointed
and
accepted appointment as provided in this Section 7.7 within ninety days
following the written notice of resignation or removal, as the case may be,
the
retiring Trustee may petition, at the expense of the Grantor, any court of
competent jurisdiction for appointment of a successor trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a successor trustee. Upon the Trustee’s delivery of the Assets in the Trust
Account to the successor trustee along with a closing statement showing all
activities from the last month report, the Trustee shall be discharged of
further responsibilities hereunder.
Section
7.8. Successor
Trustee.
Any
successor trustee appointed as provided in Section 7.7 hereof, shall execute,
acknowledge and deliver to the Beneficiaries and to its predecessor Trustee
an
instrument accepting such appointment hereunder and agreeing to be bound by
the
terms and conditions hereof. Upon the Trustee’s delivery of the Assets held in
the Trust Account to the successor trustee along with a closing statement
showing all activities from the last month report, the successor trustee,
without any further act, deed or conveyance, shall become fully vested with
all
rights, powers, duties and obligations of its predecessor hereunder, with like
effect as if originally named as Trustee herein. The predecessor Trustee shall
deliver to the successor trustee all documents relating to the Assets held
within the Trust Account delivered to it, together with any Assets remaining
in
the Trust Account. In addition, the predecessor Trustee and, upon request of
the
successor trustee, the Grantor shall execute and deliver such instruments and
do
such other things as may reasonably be required for more fully and certainly
vesting and confirming in the successor trustee all such rights, powers, duties
and obligations.
Section
7.9. Merger,
Conversion, Consolidation or Succession to Business.
Any
corporation or national association into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation or national
association resulting from any
18
merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation or national association succeeding to all or substantially all
of
the corporate trust business of the Trustee shall be the successor of the
Trustee hereunder.
Section
7.10. Release
of Information.
The
Trustee shall respond to any and all reasonable requests for information
concerning the Trust Account or the Assets held therein by any of the parties
to
this Trust Agreement.
Section
7.11. Indemnification
and Charges of the Trustee.
(a)The
Grantor and XL Capital hereby jointly and severally agree to indemnify the
Trustee and its directors, officers, employees and agents for, and hold the
Trustee and its directors, officers, employees and agents harmless against,
any
loss, liability, costs or expenses (including reasonable attorneys’ fees and
expenses and the costs and expenses of defending the Trustee or its directors,
officers, employees or agents against any claim) incurred or made without
negligence, willful misconduct, lack of good faith or breach of the Trustee’s
fiduciary duties or express obligations under this Trust Agreement, arising
out
of or in connection with the performance of the Trustee’s obligations in
accordance with the provisions of this Trust Agreement. The Grantor and XL
Capital hereby acknowledge that the foregoing indemnities shall survive the
resignation or removal of the Trustee.
(b) The
Grantor and XL Capital hereby jointly and severally agree to pay all costs,
fees
or expenses charged by the Trustee (including reasonable fees and expenses
of
counsel as provided for in Section 7.5 hereof) for acting as the Trustee
pursuant to this Trust Agreement as set forth in the fee letter between the
Grantor and the Trustee.
(c) The
provisions of this Section 7.11 shall survive the termination of this Trust
Agreement.
Section
7.12. Limitations
of Responsibilities of Trustee.
(a)The
Trustee shall not be responsible for determining the amount of Assets required
to be deposited into any Account.
(b) Subject
to
Section 7.4 hereof, the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it (i) in accordance with the Investment
Guidelines and Investment Notices received from the Asset Swap Counterparty
and
(ii) the written notices from XL Capital pursuant to Section 4.2 hereof. In
addition, subject to the immediately succeeding sentence the Trustee shall
not
be liable with respect to any action taken or omitted to be taken by it in
accordance with any written directions received by the Trustee from the Grantor
or the Other Beneficiaries relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Trust Agreement. If any such
written direction conflicts on its face with another direction signed by or
on
behalf of a Beneficiary or its Authorized Representative and delivered to the
Trustee, the Trustee shall, to the extent any such direction pertains to a
distribution to be made hereunder, make such distribution as provided in Section
5.9 hereof and shall not be liable for doing so. No provision of this Trust
Agreement shall require the Trustee to
19
expend
or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers unless the Trustee shall have received reasonable assurance that it
will
be reimbursed therefor.
(c) The
Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document. The
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents, attorneys, custodians or
nominees. The
Trustee makes no representations as to the validity or sufficiency of this
Trust
Agreement.
(d) Notwithstanding
anything to the contrary in this Trust Agreement, in no event shall the Trustee
be liable under or in connection with this Trust Agreement for indirect,
special, incidental, punitive or consequential losses or damages of any kind
whatsoever, including but not limited to lost profits, whether or not
foreseeable, even if the Trustee, has been advised of the possibility thereof
and regardless of the form of action in which such damages are
sought.
(e) Subject
to
Section 7.4 hereof, the Trustee shall be protected in acting upon any statement,
notice, resolution, request, consent, order certificate, report, appraisal,
opinion, telegram, cablegram, letter or other paper or document believed by
the
Trustee to be genuine and to have been signed, sent or presented by the proper
party or parties or their Authorized Representatives.
Section
7.13. Force
Majeure.
Notwithstanding anything contained in this Trust Agreement to the contrary,
the
Trustee shall not be responsible or liable for its failure to perform under
this
Trust Agreement or for any losses to the Trust Account resulting from any event
beyond the reasonable
control of the Trustee, its agents, or its subcustodians, including but not
limited to nationalization, strikes, expropriation, devaluation, seizure, or
similar action by any governmental authority, agency or body de facto or de
jure; or enactment, promulgation, imposition, or enforcement by any such
governmental authority, agency or body of currency restrictions, exchange
controls, levies, or other charges affecting the Assets; or the breakdown,
failure, or malfunction of any utilities or telecommunications systems; or
any
order or regulation of any banking or securities industry regulatory body or
organization including changes in market rules and market conditions affecting
the execution or settlement of transactions; or acts of war, terrorism,
insurrection, or revolution; or acts of God; or any other similar event or
the
unavailability of the Federal Reserve Bank wire or telex or other wire or
communication facility maintained by a clearing system or otherwise. This
Section 7.13 shall survive the termination of this Trust Agreement.
Section
7.14. Deposit.
The
Trustee may deposit any Assets in the Trust Account in a book-entry account
maintained at the Federal Reserve Bank of New York or in depositories such
as
the Depository Trust Company and the Participants Trust Company. Assets may
be
held in the name of a nominee maintained by the Trustee or by any such
depository.
20
Section
7.15. Certificates
of the Grantor and the Other Beneficiaries.
Whenever
in the administration of the Trust Account created by this Trust Agreement,
the
Trustee shall deem it necessary or desirable that a matter be proved or
established prior to taking, suffering or omitting any action thereunder, 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 a Beneficiary or its
Authorized Representative and delivered to the Trustee and said certificate
shall, subject to the immediately succeeding sentence, be full warrant to the
Trustee for any action taken, suffered or omitted by it on the faith thereof;
provided,
that the
Trustee, at its sole discretion, 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. If any such statement or certificate conflicts on its face
with
another statement or certificate signed by or on behalf of a Beneficiary or
its
Authorized Representative and delivered to the Trustee, the Trustee shall,
to
the extent any such statement or certificate pertains to a distribution to
be
made hereunder, make such distribution as provided in Section 5.9 hereof and
shall not be liable for doing so.
ARTICLE
VIII
TERMINATION
OF TRUST AGREEMENT
Section
8.1. Termination.
(a)This
Trust
Agreement will terminate on the Final Redemption Date (the “Termination
Date”).
The
Trust Agreement may be terminated by the Grantor prior to the Termination Date
with the written consent of each of the Other Beneficiaries upon 60 days’
written notice to the Trustee; provided,
that
such termination by the Grantor shall not be effective until such time as the
Grantor has provided the Other Beneficiaries with such alternative security
for
the Grantor’s obligations under the Reinsurance Agreement, the Securities
Issuance Agreement, the Asset Swap Agreement and the Interest Rate Swap
Agreement, respectively, as the Other Beneficiaries may request in their sole
discretion.
(b) Upon
any
such termination and subject to Sections 5.1 and 5.9 hereof, the Trustee shall
distribute any remaining Assets held in the Trust Account to or as directed
by
the Grantor, and shall take any and all commercially practicable steps necessary
to absolutely and unequivocally transfer all right, title and interest in such
Assets and to deliver physical custody, if applicable, in such Assets to the
Grantor or as otherwise directed by the Grantor.
ARTICLE
IX
GENERAL
PROVISIONS
Section
9.1. Failure
to Act.
The
failure of any party hereto at any time to exercise any of the rights or powers
conferred upon it herein shall not constitute a waiver of its right to exercise,
or stop it from exercising, any rights at any subsequent time, and such failure
shall not reduce in any degree any liability or obligation for which any other
party is bound hereunder.
21
Section
9.2. Amendments.
This
Trust Agreement may be altered, amended or terminated at any time only by
written agreement executed by each party hereto; provided
that the
consent of the Trustee shall not be required to the extent that any such
alteration, amendment or termination would not reasonably be expected to have
the effect of increasing or expanding the Trustee’s obligations or duties under
this Trust Agreement. A copy of any such written agreement not executed by
the
Trustee shall be delivered to the Trustee by the Beneficiaries.
Section
9.3. Additional
Parties.
Any
Ceding Insurer who is no a party to this Trust Agreement as of the date hereof
shall become an additional party to this Trust Agreement as a Beneficiary with
all of the rights and obligations thereof by executing a counterpart signature
page and delivering such counterpart signature page to the Trustee.
Section
9.4. Assignment.
This
Trust Agreement may not be assigned without the written consent of the parties
hereto. Subject to the receipt of such written consent, any such assignment
shall be binding upon and inure to the benefit of the parties hereto, their
successor and assigns. Notwithstanding anything in this Trust Agreement to
the
contrary, in no event shall any resignation or removal of the Trustee be
effective until a successor trustee has been duly appointed and approved by
the
Beneficiaries or by a court and all Assets in the Trust Account have been duly
transferred to the new trustee, as provided in Section 7.7 hereof.
Section
9.5. Limited
Recourse.
All
obligations of and any claims against the Grantor under this Trust Agreement
shall be with recourse solely to the Grantor’s Assets (other than its ordinary
share capital of U.S. $5,000, the amount equal to U.S. $1,500 paid to the
Grantor as a transaction fee, any interest income earned on such excluded
amounts and the Cayman Islands bank account in which such amounts are held)
for
satisfaction of the Grantor’s obligations hereunder.
All
obligations of and any claims against the Grantor under this Trust Agreement
shall be extinguished and shall not thereafter revive in the event that, at
any
time, the Grantor’s assets (other than the cash amounts representing its
ordinary share capital of U.S. $5,000, the amount equal to U.S. $1,500
paid to the Grantor as a transaction fee, any interest income earned on such
excluded amounts and the Cayman bank account in which such amounts are held)
are
exhausted. The Trustee and the Other Beneficiaries shall have no further claim
thereafter against the Grantor, its directors, officers or shareholders for
any
shortfall.
The
provisions of this Section 9.5 shall survive the termination of this Trust
Agreement.
Section
9.6. Non-Petition.
The
Trustee and the Beneficiaries, by entering into this Trust Agreement, hereby
covenant and agree that they will not at any time institute against each other,
or join in any institution against each other of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under U.S. federal or state or any non-U.S. bankruptcy or similar
law in connection with any obligations hereunder until the expiration of one
year and one day (or if longer, the applicable preference period then in
22
effect
(plus one day) under any applicable law) from the Termination Date. The
provisions of this Section 9.6 shall survive the termination of this Trust
Agreement.
Section
9.7. Paragraph
Headings.
The
paragraph headings contained herein are for convenience of reference only and
shall not limit or otherwise affect the meaning hereof.
Section
9.8. Counterparts.
This
Trust Agreement may be executed in any number of counterparts or by attached
documents, all of which shall constitute one and the same original.
Section
9.9. Notices.
(a)Except
as
otherwise provided herein, all notices, requests, demands and other
communications required or permitted to be given to the Grantor, the Asset
Swap
Counterparty, Interest Rate Swap Counterparty, the Ceding Insurers or XL Capital
under this Trust Agreement shall be in writing and shall be deemed to have
been
duly given, made and received when delivered against receipt or upon actual
receipt of (i) personal delivery, (ii) delivery by reputable overnight courier,
(iii) delivery by facsimile transmission with telephonic confirmation or (iv)
delivery by registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:
|
Grantor:
|
Stoneheath
Re
|
||
|
c/o
HSBC Financial Services (Cayman)
|
|||
|
Limited
|
|||
|
Xxxxxxxxxx
Xxxxx
|
|||
|
Xxxxx
Xxxxxx Xxxxxx
|
|||
|
P.O.
Box 1109
|
|||
|
Georgetown
|
|||
|
Grand
Cayman, KY1-1102
|
|||
|
Cayman
Islands
|
|||
|
Attention:
The Directors
|
|||
|
Telephone:
(000)-000-0000
|
|||
|
Facsimile:
(000)-000-0000
|
|||
|
Asset
Swap Counterparty:
|
Xxxxxxx
Xxxxx International
|
||
|
Xxxxxxx
Sachs International
|
|||
|
Peterborough
Court
|
|||
|
000
Xxxxx Xxxxxx
|
|||
|
Xxxxxx
XX0X 0XX
|
|||
|
Xxxxxxx
|
|||
|
Attention:
IBD Legal
|
|||
|
Telephone:
00-(00)-0000-0000
|
|||
|
Facsimile:
00-(00)-0000-0000
|
|||
|
Interest
Rate Swap Counterparty:
|
IXIS
Financial Products Inc.
|
||
|
0
Xxxx 00xx
Xxxxxx, 00xx
Xxxxx
|
|||
|
Xxx
Xxxx, Xxx Xxxx 00000
|
23
|
United
States of America
|
|||
|
Attention:
Swaps Administration
|
|||
|
Telephone:
(000)-000-0000
|
|||
|
Facsimile:
(000)-000-0000
|
|||
|
Ceding
Insurers:
|
XL
Insurance (Bermuda) Ltd
|
||
|
XX
Xxxxx
|
|||
|
Xxx
Xxxxxxxxxx Xxxx
|
|||
|
Xxxxxxxx,
XX 00 Xxxxxxx
|
|||
|
Xxxxxxxxx:
Chief Operating Officer and
|
|||
|
Director
of Global Programs
|
|||
|
Telephone:
(000)-000-0000
|
|||
|
Facsimile:
(000)-000-0000
|
|||
|
Cc:
|
XL
Insurance (Bermuda) Ltd
|
||
|
XX
Xxxxx
|
|||
|
Xxx
Xxxxxxxxxx Xxxx
|
|||
|
Xxxxxxxx
XX 00 Xxxxxxx
|
|||
|
Xxxxxxxxx:
Chief Financial Officer
|
|||
|
Telephone:
(000)-000-0000
|
|||
|
Facsimile:
(000)-000-0000
|
|||
|
XL
Capital:
|
|||
|
XX
Xxxxx
|
|||
|
Xxx
Xxxxxxxxxx Xxxx
|
|||
|
Xxxxxxxx,
XX 00 Xxxxxxx
|
|||
|
Xxxxxxxxx:
Executive Vice President-
|
|||
|
General
Counsel-Corporate Affairs-
|
|||
|
Secretary
|
|||
|
Telephone:
(000)-000-0000
|
|||
|
Facsimile:
(000)-000-0000
|
Each
party
hereto may alter the address to which notices, requests, demands and other
communications are to be sent to such party by giving notice of such change
of
address in conformity with the provisions of this Section 9.9.
(b) Unless
otherwise specifically provided herein, every notice, direction, request,
demand, acknowledgment or other communication required or permitted to be given
to the Trustee under this Trust Agreement shall be given and made under the
terms hereof, shall be in writing and may be made or given by facsimile and
shall be deemed to have been duly given or made (i) when received by the Trustee
and (ii) when addressed as follows:
|
Trustee:
|
The
Bank of New York
|
||
|
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
|
|||
|
Xxx
Xxxx, Xxx Xxxx 00000
|
24
|
Attention:
Global Structured Finance
|
||
|
Telephone:
(000)-000-0000
|
||
|
Facsimile:
(000)-000-0000
|
Section
9.10. Severability.
In the
event any provision of this Trust Agreement shall be held invalid or
unenforceable for any reason, such invalidity or unenforceability shall not
affect the remaining provisions of this Trust Agreement.
Section
9.11. Governing
Law.
Both
this Trust Agreement and the Trust Account shall be governed and construed
by
the laws of the State of New York.
Section
9.12. Dispute
Resolution.
Notwithstanding any other provision contained in this Trust Agreement, any
controversy or claim arising out of or relating to this Trust Agreement shall
be
resolved by binding arbitration administered by the American Arbitration
Association, pursuant to its Commercial Arbitration Rules. This agreement to
arbitrate shall be enforceable under the Federal Arbitration Act, 9 U.S.C.
§1 et
seq. The arbitration shall be held in New York, New York before three neutral
arbitrators, none of which shall be party-appointed and all of which shall
be
selected in accordance with Rule 11 of the Commercial Arbitration Rules of
the
American Arbitration Association. The arbitrators may hear and rule on
dispositive motions as part of the arbitration proceeding, including motions
for
judgment on the pleadings, summary judgment and partial summary judgment. The
arbitration award shall be in writing and shall state the findings of fact
and
conclusions of law upon which it is based. Judgment upon the award rendered
by
the arbitrators may be entered in any court having competent jurisdiction.
The
parties covenant that they will participate in the arbitration in good faith
and
that they will share equally its costs (which, in the case of the Grantor,
shall
constitute Extraordinary Expenses). The provisions of this Section 9.12 shall
be
enforceable in any court of competent jurisdiction, and the parties hereto
shall
bear their own costs (which, in the case of the Grantor, shall constitute
Extraordinary Expenses) in the event of any proceeding to enforce this Trust
Agreement. The decision of the arbitrators shall be final and conclusive and
shall not be subject to appeal absent manifest error. In no event shall the
arbitrators award any party punitive, special, consequential or exemplary
damages. By agreeing to arbitration, the parties hereto do not intend to deprive
any court with jurisdiction of its ability to issue a preliminary injunction,
attachment or other form of provisional remedy in aid of the arbitration and
a
request for such provisional remedies by a party to a court shall not be deemed
a waiver of this agreement to arbitrate, and in addition to the authority
conferred upon the panel by the rules specified above, the panel shall also
have
the authority to grant provisional remedies, including injunctive
relief.
[Remainder
of page intentionally left blank.]
25
IN
WITNESS
OF THE ABOVE, this Trust Agreement is executed by the parties’ duly authorized
officers on the dates indicated below with an effective date of December 12,
2006.
XXXXXXX
XXXXX INTERNATIONAL,
as
Beneficiary
By /s/
Xxx
Xxxxxx
Name:
Xxx
Xxxxxx
Title:
Authorised Signatory
Date:
12-December-2006
Attest: /s/
Xxxxx Xxxxxx
Name:
Xxxxx Xxxxxx
Title:
Authorised Signatory
Date:
12-December-2006
[Signature
Page (Trust Agreement)]
XL
INSURANCE (BERMUDA) LTD
on
behalf
of itself and the OTHER CEDING INSURERS,
as
Beneficiaries
By /s/
C.
Xxxxxxx Xxx
Name:
C.
Xxxxxxx Xxx
Title:
SVP, Chief Financial Officer
Date:
December 12, 2006
Attest: /s/
Xxxxxxxxx Xxxxx
Name:
Xxxxxxxxx Xxxxx
Title:
Asst. Secretary
Date:
December 12, 2006
[Signature
Page (Trust Agreement)]
as
Beneficiary
By:
/s/
Xxxxxxx Xxxxxx Xxxxx
Name:
Xxxxxxx Xxxxxx Xxxxx
Title:
Secretary
Date:
December 12, 2006
Attest: /s/
Xxxxxx Xxxxxxxx
Name:
Xxxxxx Xxxxxxxx
Title:
Vice President
Date:
December 12, 2006
[Signature
Page (Trust Agreement)]
STONEHEATH
RE,
as
Grantor
and Beneficiary
By /s/
Xxxxx Xxxxxxxxx
Name:
Xxxxx Xxxxxxxxx
Title:
Director
Date:
December 12, 2006
Attest: /s/
Xxx
Xxxxxxxxx
Name:
Xxx
Xxxxxxxxx
Title:
Assistant Manager
Date:
December 12, 2006
[Signature
Page (Trust Agreement)]
THE
BANK
OF NEW YORK
not
in its
individual capacity, but solely as the
Trustee
By /s/
Xxxxxxxxxxx Xxxxx
Name:
Xxxxxxxxxxx Xxxxx
Title:
Assistant Vice President
Date:
December 12, 2006
Attest: /s/
Xxxxxx Xxxxxxxxxxx
Name:
Xxxxxx Xxxxxxxxxxx
Title:
Assistant Vice President
Date:
December 12, 2006
[Signature
Page (Trust Agreement)]
EXHIBIT
A
INVESTMENT
GUIDELINES
ANNEX
A
LIST
OF INITIAL PERMITTED INVESTMENTS
ANNEX
B
LIST
OF ISSUERS OF ELIGIBLE ASSETS
EXHIBIT
B
NOTICE
REGARDING ASSETS
EXHIBIT
C
Form
of
Request Notice
for
Distributions from the Trust Account
